dollar, dollar bill y'all
a brief history of printed money
Two facts:
“greenbacks” or “paper notes” were put into circulation in 1861 to help finance the civil war
the first dishwasher was invented around 1850.
The Point of This Article, Here It is
Here’s a semi-researched timeline of paper monies in the US.
The Early Days (1775-1779)
Back in the earliest days of the United States of America, when it was just 13 angry colonies who felt very angry about taxation without representation, the United States of America needed funds to finance its Revolutionary War.
The solution?
The Continental Congress issued roughly $226 million of paper notes pegged to the Spanish dollar over a four year span. This was, on the one hand, a success, as the funds represented about 80% of the federal government’s income during this period and acted as a way for citizens to bet on the country’s success in the war.
Essentially, by purchasing United States Continental Paper Currency (Continentals), citizens were loaning the Continental Congress money in the hopes that future tax dollars would be used to pay them back (with interest). And it worked because, well, the USA is still a thing.
Of course, there is another hand to this era of money, and it was quite negative. Because there was no central financial authority in the colonies during this time period, states also began issuing their own currencies and debt certificates to fund the war against Britain. This led to a massive amount of paper currency floating around the US that lacked actual backing (outside of the promise of “hey if you give us money we’ll win the war and probably pay you back”).
It also didn’t help that King George and Crew took to the diabolical plan of spreading counterfeit notes throughout the US to further wreak inflationary havoc (but, hey, I guess it would’ve been good for social security checks, right?).
The lack of backing and excessive competition in paper monies and King George’s nefarious plan led to buying power falling drastically.
in 1775, $1 in Continentals = $1 gold
in 1777, $1.25 Continentals = $1 gold
in 1781, $100 Continentals = $1 gold.
Zee Coin Days (1792-Present)
The Coinage Act of 1972 was passed in reaction to the 1778 decision in the Articles of Confederation to give both states and nation the ability to issue funds failing miserably (see, section above).
The Act also established the US dollar as the official currency of the United States of America by giving Congress, and only Congress, the sole ability to coin money inside the country. As a byproduct, Philadelphia became home to the United States Mint.
Our Coinage Act laid out the standards for the US dollar, directing that certain denominations were minted with copper, silver, or gold. Here’s how coins used to be made (shoutout to investopedia lol):
Eagles, half eagles, and quarter eagles were minted from gold, and worth $10, $5, and $2.50, respectively. Dollars (or units), half dollars, quarter dollars, disme (the early form of the dime), and half disme were minted from silver and were worth $1, $0.50, $0.25, $0.10, and $0.05 respectively. Cents and half cents were minted from copper and were worth $0.01 and $0.005 respectively.
Another kewl thing about the Coinage Act was that US citizens could go to the US mint with raw silver or gold and have it minted into coins ~free of charge~.
It also passed a law saying that anyone who “debased” currency (counterfeited by wrapping copper in gold or something like that) could face the death penalty.
The Period Where States Tried Different Things (1837-1864)
Texas, then its own country and not a US state yet, issued “redbacks” (aka “star money”) between 1837 and 1840 to fund national debt. The redbacks were initially backed by gold and silver US coins, but were quickly devalued due to curse of overprinting, leading to 15 redbacks = 1 USD. By 1842, the government gave up on the redbacks to the point that they did not even accept them from citizens as tax payments (which is fucked up).
Redbacks didn’t last too long, as Texas was annexed into the US in 1845.
Fun fact tho, there is a fun rumor that the University of Texas’ “burnt orange” color originates from redbacks.
State Bank Notes is probably my favorite section of this document. Over 7,000 variations of money were in circulation after 1836 in response to the Free Banking Era. In essence, in this period, only state-chartered banks could issue fiat money against precious metals. During this time, no federal regulations regarding banking existed, so banks just sort of went crazy issuing their own lines of credit, leading to what people call “Wildcat Banking” — where banks had an average lifespan equivalent to that of a lazy Texas Tech Student’s graduation track (5 years).
To summarize what would happen: a shady bank would open, issue currency but maybe not have enough collateral backing the notes they issued, tough times would hit the economy, people would go to withdraw gold or something, banks would be like “oh shit, we don’t actual have enough deposits compared to the amount of bank notes we gave out” and then the bank would fail, which would make other people go to pull out money, which would make another shady bank fail…and that’s how you get a bank run?
Civil War Monies (1850-1900)
There are three types of civil war monies that are of interest, with one and two being interesting and 3 being SUPER IMPORTANT.
During the Civil War there was a Coinage Shortage because the value of actual metals became worth more than the actual coins (people would melt their coins to use for industrial purposes rather than use them to pay for food).
This meant that the exchanging of mediums became quite difficult, which led to the distribution of “shinplasters”, or low denomination pieces of paper that gave people buying power of say 25 cents, 15 cents, or 3 cents.
So the Civil War also saw the creation of a new type of money in the US thanks to the Confederacy. The notes were very similar to the Continentals: “buy this, help us win war, we will pay you back”, said the Confederates. Thankfully, they lost, so their currency almost immediately became worthless.
and three…
To finance the Civil War, the US issued paper money for the first time! They called them “greenbacks”. This is the first time they issued a non-interest bearing note in paper. In the past all paper currency was more of a bond or a treasury bill (“hold this and redeem it for 1-5% in three years or spend it at the grocery now at a discount to that 1-5%). However, with “greenbacks”, paper money transformed into what you and I would consider to be the "cash” that we used today.
National Bank Notes (1863-1929)
National Bank Notes was currency issued by National Banks — banks that were chartered by the United States Government.
They weren’t really used as legal tender in the US, but could be used for payments by the US government or to the US government.
In essence, National Bank Notes were empowered by the 1863 National Banking Act, which put federal oversight on banks, which ended the “Wildcat” banking era we discussed above. To quote Wikipedia, here’s how the system worked:
Banks with a federal charter would deposit bonds in the US Treasury. The banks then could issue banknotes worth up to 90 percent of the value of the bonds. The federal government would back the value of the notes—the issuance of which created a demand for the government bonds needed to back them.
To summarize, the National Banking Act pretty much looked at the terrible practices of the state-led banking industry and put up guardrails to protect consumers by forcing banks to do things like “keep x % of deposits on hand at all times and stuff”. In return for creating a safer system and incentivizing the demise of wildcat banks, the gooberment told the banks that their life would be so much easier because they would be backing the value of the notes the banks issued.
This program ended in 1930 or so (in the midst of the Great Depression).
Gold and Silver Certificates (1865-1964)
Backed by gold and bullion deposits, a gold certificate showed that people owned gold at a bank or somewhere even though they did not have physical ownership of the gold.
From my brief research, it appears that these certificates were based on the Coinage Act, meaning that these gold certificates were used as actual currency, redeemable for goods and services at a rate of $20.67 per troy ounce.
Of course, these things were demolished into oblivion in 1933 when The Gold Reserve Act made holding gold illegal in the states (yes, this happened guys).
The same thing happened with silver certificates, except that holding silver was never outlawed, it just was not that popular.
Present Day Cash Bros!
The Federal Reserve Act of 1913 pretty much created the central banking system that we know and worship today. Federal Reserve Notes account for like 100% of our paper currency today. Ya know the Benjamin Franklin, that beautiful $100 bill? Yup, that green thing is a Fed Note.
A Fed Note is a claim by the holder on an obligation of the Federal Reserve (in the early days, it could’ve been a claim on a Fed Reserve Bank, but that system was halted pretty quickly).
Here are a few facts on our paper monies:
Fed Notes take 4,000 double folds back and forth to tear
Fed Notes used to go up to $10,000 until 1945
The Fed can’t actually print money or mint coins — it just holds the currency and makes sure it circulates well and shit? (Treasury is in charge of making printer go brrr).
Conclusion
Ok, so this was written in 62 minutes and was based on Google searches, so there are most definitely a bunch of errors, incomplete truths, timeline mistakes, and spelling snafus.
If you find anything particularly egregious, pls comment my fine ser or madame.
- Kram