The History of Money

Paper Money

First paper money introduced in 1690 by the Massachusetts Bay Colony.

Continentals

In 1775 the Continental Congress authorized the limited issuance of paper currency to finance the Revolutionary War. These notes were called Continentals, and were denominated in dollars and backed by the “anticipation” of future tax revenues. The Continentals were printed to read “The United Colonies” and had pictures of colonial men. Because they were not backed by gold or silver, they quickly devalued and became worthless hence the “not worth a continental."

In 1777 after the Declaration of Independence was signed, the first notes bearing the words “The United States” were issued and signed by well known revolutionary figures to give them credibility.

In 1791 the Bank of the United States received a charter to operate until 1811, followed by the Second Bank of the United States from 1816 to 1836. Chartered by Congress vs. the State and privately owned they were authorized to issue paper bank notes and serve as the fiscal agent of the government. Both banks were unpopular, especially with those wanting easy credit, and in 1832 Andrew Jackson vetoed the recharter of the Second Bank.

WILDCAT AND BROKEN NOTES

Next came the “Free Banking Era - a quarter century in which American banking was a hodgepodge of state-chartered banks with no federal regulations or operating laws All varieties of notes were in circulation. Some were safe and exchanged for par value others were worthless.
By 1860, an estimated 8,000 different state banks circulated “wildcat” or “broken notes.. Wildcat nickname referred to remote mountainous regions that were more accessible to wildcats than customers, making it very difficult for customers to redeem these notes. Broken referred to the frequency with which some of the banks failed, or went broke.

GREENBACKS

Civil War-In 1861 with a need to finance the Civil War, Congress authorized Demand Notes, the 1st issue of paper money by Government since the Continentals. Printed in $5, $10, & $20 denominations, redeemable in coins on demand, green in color, hence the name “greenbacks”. Since 1861 they are still redeemable in current cash at face value. This was a time on record of currency stability.

In 1862, Demand Notes were discontinued by Congress and Legal Tender Notes were issued in denominations from $1 to $1,00, and later $5,000 to $10,000. This was the 1st national currency.
From 1862 to 1876 coin hoarding and the need to use metals for war purposes created a coin shortage, and small change substitutes in the form of postage stamps, tickets, bills. Over $368 million Fractional Currency in 3 to 50 cent denominations were circulated.

From 1861 to 1865 Confederate currency was being issued to millions of Southerners, gambling that a Confederate Victory would ensure that the currency would be redeemable.. The North printed counterfeit Confederate currency in an attempt to debase the notes. Inflation was at an all time high, especially in the South. The Confederates lost confidence in their currency and began to rely on barter or black-market greenbacks. By the end of the war the Confederate notes were worthless.
National Bank Act

In 1863 President Abraham Lincoln convinced Congress to pass the National Banking Act, establishing a national banking system and a uniformed national currency, to be issued by the new National Bank.
As a backing the banks were required to purchase US government securities.

In 1865 a 10 percent tax was levied on State Bank notes, eliminating the profit in issuing them.
Between the Civil War and World War I period most of the paper currency circulating consisted of National Bank Notes, and were issued until 1932.

From 1863 to 1877 National Bank Notes were printed by private bank note companies under contract to the Federal Government. The Federal government took over the printing in 1877.

Gold and Silver Certificates

Late in the 19th century the government wanted to increase its reserve of precious metals, so they offered certificates in exchange for deposits of silver and gold. These colorful, and vivid Gold certificates were issued in 1863 and put into general circulation in 1992. In 1933 with the country facing a severe depression and a banking crisis, the public began to demand gold.

Runs developed on the Federal Reserve Banks, as well as commercial banks. To deal with the crisis only the Federal Reserve Banks were allowed to hold gold. In 1934 the Federal Reserve Bank was required to turn over all gold coins, bullion and certificates to the US Treasury in return for a new gold certificate. They never went into circulation and the last ones were printed in 1935.

In 1964, private citizens could once again hold gold certificates issued before Jan 30, 1934, but they could no longer be redeemed in gold.

In 1974, this changed and private citizens could once again legally hold gold.
Silver Certificates

In 1878 silver certificates were first issued in exchange for silver dollars. With a variety of designs, color and people’s faces. in 1886 a $1 silver certificate was the only piece of US paper currency to bear the portrait of a woman Martha Washington.

Silver certificates were the major type of currency in circulation. In the early 1960’s with the price of silver jumped to over $1.29 an ounce it was evident that further increases would make it profitable for holders of silver coins to sell them in the open market.

FEDERAL RESERVE NOTES

To avert this crisis Congress eliminated silver certificates in 1963 and empowered for the 1st time the Federal Reserve Bank to issue $1 & $2 Federal Reserve Notes.

The Federal Reserve System

In 1913 Congress passed the Federal Reserve Act aimed at resolving long standing money and banking problems which had let to bankruptcies and general economic contractions. The Act created the Federal Reserve System as the central bank to regulate the flow of money.

I 1914 Federal Reserve Notes, which today comprise more than 99% of paper money were issued by Federal Reserve Banks. They replaced National Bank notes as the dominant form of paper money and were issued in ranges from $1 to $10,000. The $100 noted had been the largest denomination printed since 1946. In 1969 all notes greater than $100 were retired. because of lack of demand. The design of the Federal Reserve Notes has changed very little. In 1929 the size of the notes were reduced.

In 1929 it was decided that the front of a note would have a portrait and for notes under $100 a building or monument on the back.

In 1955 the inscription “In God We trust” was added.

In 1966 the Latin wording on the Treasury Seal was replaced by an English translation.

In 1990 a new series of notes were introduced to improve security and counter act counterfeiters. These new notes include micro printing and an embedded security strip.

In 1996 a complete redesign was introduced with the issue of a new $100 bill. The most noticeable change is the placement of Benjamin Franklin’s image, slight off to the side and simplified borders. A universal Federal Reserve seal appears on the new note.

The future of Currency

Despite predictions of a “cashless society” relying on electronic payments, the public demand for currency continues to grow. Debit cards used for purchases and transaction records could greatly reduce the need for cash, but paper currency still has the advantage of privacy.SO LET’S REVIEW?
Money is a fact of life.....as long as there has been an America, there have been many different kinds of currency.

Do you remember the different kinds of currency?

It has the same name as a car your grandparents might drive? It was America’s original buck.......
It is the CONTINENTAL...... used to finance the American Revolution. It didn’t have strong backing of gold or silver so it quickly devalued and soon became worthless...... remember the saying
“not worth a continental”

What is the name of another currency?

It is the name of an animal.... sort of remote. It’s the WILDCAT. Banks often set up shop way out in the remote mountainous regions, prompting for people to say it was easier for a wildcat to redeem these notes vs people thus the name. This was during the Free Banking era and America was flooded by all kinds or currency most of it unredeemable.

Ok what is another currency?

We often refer to this when we have spent all our money....

Broke... or Broken money. This referred to the frequency of the banks that issued notes and went bust.
It’s one of the primary colors... and the color we associate with money.. anyone guess?

The greenback.... Produced to finance the Civil War, this was the 1st time after the Continental that the US government resumed printing paper money. Green in color, hence the name.

Ok last one.... open your wallet, if you are carrying some cash on you, chances are you have this kind of currency...

Its Federal Reserve Notes, these notes became the dominant form of paper currency in America. The $100 bill is the largest currency note in circulation.

The largest bill ever was for $10,000, if you have one you can spend it, but most of them are now in museums.