Thus, by the end of the 19th century, the foundations of the modern financial system had taken shape. The practice of fractional reserve banking, which had been illegal in the Middle Ages and the Early Modern period, now became perfectly legal. State banks, where ordinary banks stored their reserves, received the privilege of issuing “legal tender” and thus, in effect, began to manage the issuance of fiduciary money, which turned them into central banks in the modern sense of the word (the Federal Reserve, which emerged later than other state banks, was created from the outset as a central bank). Gold receipts (banknotes) transformed into the “national currency” and began to take on a life of their own, separate from gold. The crowning achievement on this path was the formula of the monetary unit’s “gold content.” Look what a magnificent sleight of hand — from now on, it’s not that one thirty-fifth of an ounce of gold is called a dollar, but rather that the dollar “contains within itself” one thirty-fifth of an ounce of gold! With this framing, the idea that the state can alter the “gold content of the monetary unit” seems entirely natural and logical. During the era of the classical gold standard, a pound was defined as a quarter of an ounce of gold, and a dollar as one twentieth. Yet from the layperson’s perspective, “a pound exchanges for five dollars.” This created the illusion of the “independence” of national currencies, which somehow manage to exchange for one another.