This special issue of the Financial History Review contributes to the vast literature on the political economy of monetary unions. Inspired by the recent events in Europe, it reaches back in history to consider an earlier experiment in forming a monetary (as well as economic and political) union. In this historical case the pivotal event was the ratification of the United States Constitution in 1788, two centuries before the Maastricht Treaty. Between formal independence in 1781 and the implementation of the Constitution reforms in 1789, the fledgling country was organised politically into a loose confederation of thirteen, virtually sovereign states. Despite the nominal powers granted to the national government under the Articles of Confederation, it lacked the direct means to collect taxes and to enforce its policies. Consequently, during this brief period, state governments could and did pursue their own economic and monetary policies.

The US monetary union has undergone four distinct phases of development. From the early colonial period through the Revolution and Confederation, the unit of account differed in each region of British North America. Soon after the Constitution went into effect in 1789, the country shared a single specie-based unit of account and standard of deferred payment, but exchange media were numerous. After the Civil War, the trend was towards the use of fewer media of exchange. Over the course of the twentieth century, the current system, characterised by a common medium of exchange denominated in a single unit of account divorced from specie, evolved.

The monetary powers embedded in the US Constitution were revolutionary and led to a watershed transformation in the nation's monetary structure. They included determining what monies could be legal tender, who could emit fiat paper money, and who could incorporate banks. How the debate at the 1787 constitutional convention over these powers evolved and led the founding fathers to the specific powers adopted is presented and deconstructed. Why they took this path rather than replicate the successful colonial system and why they codified such powers into supreme law rather than leaving them to legislative debate and enactment are addressed.

A convertible US-dollar monetary union was the least controversial component of the US financial revolution of the early 1790s. Although the fiat paper currencies of the colonies before 1776 sometimes worked reasonably well, the founders had good reasons for the constitutional ban on their continuance by US states. The ban, a surrender of states' sovereignty over money, at the time proved to be relatively uncontroversial for two reasons. One is that the financial revolution lightened the fiscal burdens of states by assuming their debts and making them part of the national debt. The other is that states quickly learned that chartering banks could accomplish virtually all of the legitimate purposes of state fiat money issues, and possessed additional economic and political advantages.

The transition of the US money supply from the mixture of paper bills of credit, certificates and foreign coins that circulated at various exchange rates with the British pound sterling during the colonial period to the unified dollar standard of the early national period was rapid and had far-reaching consequences. This article documents the transition and highlights the importance of this standardisation in bringing order to the nation's finances and in facilitating the accumulation and intermediation of capital. It describes how the struggle of the colonies to maintain viable substitutes for hard money set the stage for the financial leaders of the Federalist period to settle upon the dollar, attach it to a convertible metallic base, and create a national bank that issued notes denominated in the new monetary unit. It also presents recently constructed estimates of the US money stock for 1790–1820 and relates them to measures of the nation's early modernisation.