Ben Franklin knew and practiced the issue of fiat currency. The trick was that his currency was debt-free, unlike Federal Reserve Notes.

The problem wasn’t the lack of a “modern” system — the modern system is optimized for wreck-it-and-run profiteering. The problem was the presence of traitors (who attempted to profiteer in various ways, including banking) and the lack of Andrew Jacksons to keep killing the bank.
.
.
Fabius Maximus replies: Judanoose refers, I think, to an interesting work by that polymath, Franklin. However, since Franklin never acted as treasurer for a nation or state, I suspect he overstates the significance of this little essay (2,175 words): “A Modest Enquiry into the Nature and Necessity of Paper Currency“; Benjamin Franklin (1729).
.
Frankin shows that some special interest groups benefit from inflation, others from deflation — insights which apply to our time as well as 18th century America. However, I suspect both 19th and 20th century economists knew that too much money in circulation was bad, as well as too little. The question is how to know what is “too much” and “too little.” Franklin does not tell us this secret.
.
There are many solutions to this problem. Some use fixed rules, and cause consideable suffering as a corrective force. Some rely on human judgement, and cause considerable suffering when they do not work. The best currency rule, like the best political regime, remains a subject for study and debate. I believe the late 19th century system served America poorly, but might have been the best possible given the state of economic science at that time.

The gold standard “capped” US growth during the late 19th century. Instead of a long expansion, like that in post-WWII emerging nations, we had a painful boom-bust cycle. Brutal depressions, which vaporized much of our middle class. That was one factor behind our side into a capitalist - proletariat class structure, which had so many ill results in the first half of the 20th century.

Another factor was industrialization, destroying the craftsman class. Much later, the New Deal and later regulatory programs favored large corporations over the small business class. All of these, and other developments, broke the “class” of independent Americans (the American bourgeoisie**), replacing them with a mass of dependent employees for whom economic security is the primary goal. (as Duncan said in comment #11)

If only we had a modern financial system in the 19th C! One might just as well wish that we replaced kerosene with nuclear power.

** I use bourgeoisie in the Marxist sense, the social class which profits from ownership or trade in capital assets, or from commercial activities such as the buying and selling of commodities, wares, and services.

It can be difficult to separate legend from history, but the Revolutionary War a.k.a. War for Independence was characterized by rather strong-minded individuals who fought from ideology. This undoubtedly supported the government, but I think the question was intended to discover whether the individuals had much of an impact on policy.

Certainly the U.S. government handed out a great deal of frontier land. Westward expansion would have been impossible without this proto-socialistic handout to a (sometimes lower-class) special interest group. Any time in American history when the lower or middle class started a movement and the government decided to run to catch up and then put itself in front of the parade, a similar observation can be made. Consider irrational popular movements like alcohol prohibition.

Sorry — should have typed “property-owners” above. Also, does anyone else have a problem with the sidebar on the right of the page hiding the last several characters of the comment line?
.
.
Fabius Maximus replies: try purging your memory cache.

I thought I had posted a comment on this thread last night, but as it was similar to a contentious comment I had made to a post by Fabius a few days ago, maybe he censored it.

In less elegant words, I agreed with the idea Duncan refers to above — resilient communities. I called it after a current slogan — relocalization.

I also questioned — and I think Fabius heartily disapproves this line of attack — where in earlier American history he found evidence of this sturdy, indepent, civic-minded American citizens — having an impact on government — other than the limited class of property like the founders?

An informed electorate is truly an indispensable theoretical requirement of democratic government, and a great anguish to democratic-minded people today that we clearly dont have one. But I wonder when we have ever had one? Isn’t it truer that Americans have largely gone along with the actions of their government because they were doing well under them? That is a very passive form of consent, not the active virtuous participation imagined by Fabius, and others on this thread.
.
.
Fabius Maximus: Due to a technical error on my part, comments were being posted in two places. I have moved them all over here. I apologize for the confusion.
.
I do not delete comments with leaving an entry and an explanation.

I can’t state off hand what the relative distribution of George Washington’s vs. Daniel Boone’s was in 1788.

The point was that Daniel then had the capacity to tell George to take his powdered wig and shove it. The point being that George’s plantation did not then threaten to gobble up Daniel’s farm - the way that Walmart now threatens to gobble up the local grocery store.

My favorite summary of this old idea is Longfellow’s village blacksmith standing tall under the spreading chestnut tree - looking every man in the eye for he owes not a dime to any man.

To the extent that contemporary Daniel’s likewise share have this capacity, then the fundamental essence of the Constitution will endure.

Actually, the stuff John Robb is currently writing about resilient communities seems to be not too far off from what I am now talking about.
.
.
Fabius Maximus replies: I agree. The founders believed, to varying extents, that this independence of a large fraction of the citizenry was necessary for a successful Republic. There are indications we are moving towards a Client-Patron system, like Mexico’s — incompatible with self-government.

1: U.S. citizens overestimate that. Many states shared values and liberties with the U.S. in 1945 - and many typical U.S. features of society/state were rarely exported (I wouldn’t know them as typical U.S. if they were).

3: The USA had a positive trade balance for decades after WW2 - this excludes the possibility that the USD had at that time the function that you describe. Net export (goods and services = net capital exports). Bretton Woods was very different than your description of the post-war time in general.

4: Really? I don’t remember much 3rd generation warfare. Some episodes of Korean War early on, two conflicts involving Israel, one battle in Ogaden, some South African incursions to Angola - but most of post WW2 warfare was either militia-grade battling (IIRC that’s 1st gen?) or co-called 2nd generation warfare (most of the Korea war, much of Afghanistan and Indochina wars, South Asian conflicts).
3rd generation warfare dominated the threats, but not the actions (otherwise - NATO planning for WW3 in Europe looked extremely linear!).

5: Most of the growth was not due to debt, but due to technological advance.
.
.
Fabius Maximus replies:
.
I believe #1 is a fair description, but it is of course subjective assessent. The political trends was toward things associated with the Anglo-american political system: free markets, representative democracy, individual “human” rights.
.
I do not believe you have stated #3 correctly. The equation is (net balance from trade in goods and services) + (net capital flows in/out) = the current account balance. The reserve currency can have a c/a balence that is zero or positive (a creditor) — like the US until the late 1960’s — but if it has a negative c/a balance (a borrower), it will eventually lose its status as the reserve currency — a storehouse of value and medium of trade.
.
#4 — Quite right, there were few 3GWs, although some of those were important. Korea, Vietnam (ended by standard WWII-like battles), the “6 day war”, the Yom Kippur War, the Falklands War, the Iraq - Iran war, the first Gulf War. The entire period lived in the shadow of the Cold War, the end war between the USSR and the US. But, more significant, most people considered 3GW to be the dominant form of military power, and acted accordingly.
.
#5 — I did not say that debt accumulation was the only or even the largest drive of wealth-generation. Rather that the accumulation of debt generated wealth but at the cost of eventually bringing to an end the post-WWII regime. I described this in detail in “Death of the post-WWII geopolitical regime, III — death by debt“.