1.22 History of American money and banking system

(second period).

The American monetary and banking systems have gone through several periods of development. The second period lasted from 1860 to 1913.

The situation in the country and problems connected with the Civil War convinced national leaders that the United States needed a better banking system. Congress took steps to establish a new national banking system.

By the end of the Civil War in 1865, $450 million in currency was in circulation but this fiat money was backed only by the federal government’s promise to repay at some future date. After the Civil War, Congress took actions to support the national currency as a stable medium of exchange. First, Congress tied the paper money to gold with the passage of the Coinage Act of 1873. The Gold Standard Act of 1900 committed the government to the gold standard — a monetary system in which paper money is fully backed by and convertible into gold.

The next step which Congress took was to create a dual banking system composed of national banks and state banks. The system brought more uniformity and stability to money and banking. The National Banking Acts of 1863 and 1864 required banks to hold gold and silver reserves. National banks were chartered by the federal government. As for the state banks they were chartered and regulated by individual states.

A further decision by the federal government was to issue a national currency only through the national banks. A national currency provided a nationally acceptable medium of exchange and stabilized the entire economic system.

So, a national system of banking introduced in the second period increased public confidence in paper currency and in the banking system as a whole. But of course, the system had some disadvantages. First, it did not provide for an efficient way to regulate the amount of money circulating in the economy. Second, the system lacked any central organization.

(1632)

Part 2 Successful Businessmen

2.1 Putting body and soul into shopping for soap

When approaching his new business, Nicholas Mergelis thought not only of the customers’ bodies, but of their souls as well. Mergelis decided to address a broader audience with a popular but not very expensive concept. His first shop, Dlya Dusha I Dushi, or For Shower and Soul soon appeared. “It’s only in Russia that you can make a brand in two years, anywhere else in Europe it would take at least 10 years”, Mergelis said. Apart from this, there are other reasons to celebrate. His business is booming, and more shops are to open with new products on their shelves. All the shops in Russia are run by open joint-stock company Dlya Dusha i Dushi. Mergelis, who is in his 30s, earned a degree in textile engineering in France and came to Russia in 1993 to work in his father’s consultancy.

Meanwhile, he was already thinking of a concept that would appeal to more customers — a chain of shops that would be more friendly to the customer’s wallets. He decided to create his own brand and began working on his own concept. Now his chain Dlya Dusha I Dushi has 16 shops in Moscow and four in the regions. And his team now counts 150 employees.

Mergelis is planning to have 40 shops in Russia. Today some 35,000 people shop in his stores per month. The shop logo has a green tree with the letter “N” for a trunk — an idea that along with the name took two months of brainstorming. They wanted to show the symbol of nature in their brand. And in the name they created a pun on the word “dush”, or shower.

In the shops which measure from 30 to 50 square meters and are normally set in street pavilions, he sells everything from shower gel and body lotions to sauna accessories — about 1,500 different items in all. Almost all the products come from Germany, Italy, Spain, France and the United States. But Mergelis’s most cherished ambition is to have all the products he sells produced domestically.

The businessman is not interested in short-term profit. All the money he gets he reinvests into new shops. Mergelis is interested in setting up a big retail chain of 200 shops, a Russian brand with a huge quantity of stock. Then he will go public, hopefully in four to five years.

(1821)