Paper currency was first developed in China in the 7th century and later adapted by the Mongol Empire before spreading to Europe and then the United States. China developed currency because of a shortage or metals. Notes printed promised the holder that it be redeemed for something of value and can be traded as specie. The Mongolian Empire learned from the Chinese and issued currency that they backed by the assets of their conquests. Since both China and Mongolia issued state guaranteed currency, the paper was trusted in commerce and helped build a steady stream of commerce between Europe and the east.
Although Europe traded eastern currency as trade was opened between the regions, currency was not a part of regular trade until the 13th century. In Europe, individual banks issued currency as a promissory note against assets held by the bank. Essentially, these were promissory or demand notes that was supposed to allow the holder to trade the note for specie on demand. Unfortunately, the practice was abused to try to raise additional capital and caused a lot of banks to fail.
The problem was not limited to private banks or loan companies. Banks owned by the nation states also tried to use currency as an investment vehicle without sufficient funds to back their values. Currency manipulation by those banks lead to man bank failures and economic depression that are woven through some of the strife through Europe.
Switzerland, France, and England were the first counties to organize and regulate the banks and regulate how they issue currency. Each country has experienced bank failures of not only the state chartered banks but the state central bank making the issued paper currency worthless.
Currency did not see a wide acceptance until it was issued in the Massachusetts Bay Colony in the 17th century. It was the first time that currency was issued in predetermined amounts. Since the colonies did not have the ability to coin money, all colonies issued its own currency by the 18th century. These notes functioned as currency but actually were bills of credit, short-term public loans to the government. For the first time, the money had no intrinsic value but was valued at the rate issued by the government of the colony in payment of debt. Every time the colonial government would need money, they would authorize the printing of a specified quantity and denomination of notes that it would use to pay creditors. The emission laws also included a tax that would used to repay the bill of credit and the promised interest.
As taxes were paid using the paper currency, the paper was retired. As the notes were removed from circulation, that was less payments the government had to make. On the maturity date, people brought their notes to authorized agents who paid off the loan. Agents then turned the notes over to the colonial government to be reimbursed and collect a commission for acting as an agent.
Sometimes, colonies could not pay back the loan. In those cases, the colonies passed another emission law to cover the debt owed from the previous emission plus further operating expenses. In this case, mature notes were traded for new notes. The colonists accepted this system since there were shortages of coins as well as there being an inability to convert the value of foreign coins into colonial shillings by farmers and other unskilled in such matters.
During the revolutionary war, the Continental Congress began to issue paper money to support the war efforts. The colonies also continued to issue paper currency. While the colonial issued notes had some value, those issued by the Continental Congress was not as sure and the notes’ value plummeted. With the saying “Not Worth a Continental” becoming popular so did the term “shinplasters” to describe the notes lining colonialist’s boots to help keep their feet warm.
Counterfeiting was rampant by the mid-18th century. In order to combat the problem, Benjamin Franklin devised the nature print, an imprint of a leaf or other natural item with its unpredictable patterns, fine lines, and complex details made it more difficult to copy.
To create a nature print, Franklin placed a leaf on a damp cloth. The cloth was placed on top of a bed of soft plaster that pressed the leaf into the plaster. Once the plaster hardened, it had a negative impression of the leaf. Molten copper was then poured over the plaster to make the printing plate. Franklin first used nature prints for the 1737 New Jersey emission. He also used different leaves for different denominations and elaborately engraved borders to further thwart the efforts of potential counterfeiters.
Franklin partnered with David Hall printing notes for New Jersey and Pennsylvania colonies. Along with his nature print, Franklin also included the phrase “Tis Death to Counterfeit.” Aside from trying to scare away potential counterfeiters, the penalty for counterfeiting in the 18th century was death. No convictions for counterfeiting colonial currency or death sentences have been recorded.
Later, Hall partnered with William Sellers to print Pennsylvania currency when the Pennsylvania assembly sent Franklin to England as their colonial agent.
Other printers tried different methods to thwart counterfeiters. James Parker of Woodbridge, New Jersey printed notes in two colors. With printing a labor-intensive process, it was thought the process to cumbersome for counterfeiters to go through the process of the second printing. Also, Parker used red ink as the second color. Red was more expensive than black ink in the 18th century.
The next wave of note is known as Obsolete Notes, sometimes called Broken Banknotes. These were privately issued currency starting in the 1830s backed by the assets of the issuing bank. These notes became obsolete in the 1860s when many of the issuing banks failed and the federal government changed the laws regarding currency issues. Obsolete notes are a popular collectible since many feature beautiful images, called vignettes, that represent local industries or patriotic themes.
As the Civil War raged, the public hoarded coins creating a shortage of circulating coinage. People started to use postage stamps for transaction requiring small change. Stamps were traded in envelopes that would fall apart causing the gum on the back to make them a sticky mess. As a result, the post office issued small, rectangular Postage Currency in 1862. Postage currency was larger than the postage stamp without the gum on the reverse, and the front depicted the postage stamp and its value. Without the adhesive, they could not be used for postage but could be redeemed at any post office for its face value.
Currency in the United States went from its chaotic stage to something the government issued and regulated with the passage of the National Bank Act of 1863. The law replaced the postage currency with fractional currency. Authorize by the government and printed by the American Banknote Company, fractional currency was issued through 1876 when coinage production caught up with demand and hoarding had ended. At this time, the Currency Bureau, later to be renamed the Bureau of Engraving and Printing (BEP) was created to cut and distribute the notes. Fractional currency is a popular collectible especially amongst those with interest in the Civil War.
Another Civil War collectible is Confederate Currency. These banknotes were primarily demand or promissory notes back by non-existent assets that made the notes worthless by the end of the war. During the war, the Confederate States of America issued seven series of currency printed by different printers throughout the south, some in the north, and in London. Confederate coinage, also collectible, was struck using mints under siege in Charlotte, Dahlonega, and New Orleans. During the Civil War, the chief coiner of the New Orleans Mint fled to France to continue producing coins for the Confederacy. This history makes these numismatics are very collectible by history and Civil War buffs.
Following the Civil War, paper currency is identified by type, denomination, and series date. The series date is not necessarily the date in which the note was issued. The series could represent the year the law authorized the notes, the year the production began, or in the case of current Federal Reserve Notes, the year when the signature of the Secretary of the Treasury changes.
Not including fractional and Confederate currency, the following are characteristics of United States currency:
- Demand Notes were the first paper currency printed for the United States government for general circulation. These notes were essentially loans to the government during the Civil War to be paid on demand at designated Treasury offices following a maturity date. The backs of these notes were printed in green to prevent counterfeiting by people taking pictures of the note using a camera, the new technology of the time. Green did not photograph well. The term “greenback” came from the use of green inks to print these notes.
- United States Notes were the first currency authorized by the Legal Tender Act of 1862 and the first notes printed by the National Currency Bureau. Also known as Legal Tender Notes, these notes were supposed to be backed by assets held by the government that were not necessarily precious metals. Large size United States Notes are very collectible with great designs that make them special.
- National Bank Notes allowed banks with a federal charter to issue notes against their assets. In order for the banks to be allowed to issue currency, they had to purchase bonds from the Treasury and were allowed to issue currency up to 90-percent of the value of those bonds. The bonds were used by the federal government to insure the value of the notes. All notes were printed by the Bureau of Engraving and Printing to ensure that the designs were identical with only the bank name, location, and charter number printed for the issuing banks. The National Bank Note program ended in 1935 when the bonds securing the notes were terminated as part of the banking reorganization during the Great Depression. National Bank Notes are great collectibles for those interested in collecting items representing a state or region.
- Silver Certificates began in 1878 when the government decided to increase the production of silver coinage with the passage of the Bland-Allison Act to satisfy silver mining interests. Silver coins were deposited with the Treasury and the equivalent dollar amount of silver certificates where produced. Silver Certificates could have been presented to the Treasury Department and redeemed for silver dollars. The series 1953B silver certificates were the last produced for circulation. In 1964, with the price of silver rising, the Treasury stopped redeeming silver certificates for silver dollars and started to distribute small vials of silver flake equal to $1. This redemption program stopped in 1968. All but the very rare 1934 Yellow Seal North Africa notes are available for collectors in nearly every denomination.
- Gold Certificates were generally used to transfer money between banks and other large financial institutions. First issued in 1878, Gold Certificates were backed with gold deposited with the Treasury. Some of the lower denominations did circulate to a limited degree, but banks used others. Gold certificates were printed with bright colors, mostly gold-colored, and the reverse on the large notes (pre-1929) were also gold-colored. Small notes were printed with the traditional green reverses. Gold certificates were recalled with the gold recall in 1933.
- Treasury Notes were issued as part of an 1890 and 1891 series to be paid to individuals selling silver bullion to the Treasury. Those paid with these notes could redeem them for the equivalent value in gold coins. The Treasury stopped this program after 10 years because of the considerable amount of labor required to carry out this program.
- Federal Reserve Notes (FRN) were first issued in 1914 by the newly formed Federal Reserve System and are still being printed and distributed today. When first issued, FRNs were printed as large size notes and were reduced to the small notes we are used to today in 1929. After 1945, the Bureau of Engraving and Printing stopped printing all denomination over $100. By 1969, those large denominations were removed from circulation. Designs of FRNs remained the same until 1995 when the BEP altered the designs to include new security features. However, the $1 FRN has not changed since it was first introduced in 1929. FRN are readily available and accessible to most collectors. Common ways of collecting is by signature pairs. Other ways of collecting FRNs is by serial number patterns (e.g., radar patterns, series, low numbers, etc.), and by Federal Reserve District represented by the note.
- Federal Reserve Bank Notes (FRBN) began to be issued in 1915 to transition from National Bank Notes to Federal Reserve notes. FRBN were obligations of the issuing Federal Reserve Bank branch and not the U.S. government. FRBN production was discontinued in 1934 and were stopped being issued in 1945. Since FRBN resembled National Bank Notes except that the issuing bank is a Federal Reserve Branch and are printed with “National Currency” across the top.
Currency collections can be as varied as the types of currency printed. Some currency was printed with themes such as the Educational Series of 1896 that used allegorical images in an attempt to educate the public. Other ways to collect currency is by their design, the color of the seal, the issuing bank, serial numbers, and signers.
If you collect by signers on the note, one of the more interesting notes is known as Barr Notes named for Joseph W. Barr, the 59th Secretary of the Treasury. Barr was confirmed and sworn into office on December 21, 1968, one month before the end of the Lyndon B. Johnson administration. Since the Secretary of the Treasury’s signature is on all Federal Reserve Notes, the BEP printed over 485 million one dollar notes with Barr’s signature before his term ended on January 20, 1969.
In the case of currency, size matters. Aside from the denomination, standard currency printed by the BEP used to be larger than it is today. Prior to 1929, U.S currency was 7 1/2 inches long by 3 1/8 inches wide. These are commonly called large notes. Another nickname for these notes are horse blankets. Beginning in 1929 with the Series 1928 notes, U.S. currency was reduced to the 6 1/8 inches by 2 5/8 inches notes we are used to using today. These are commonly called small notes.
If you ever looked at a note and noticed that a star (“*”) was included in the beginning or end of the serial number, you have a Star Note. A Star Note is used to denote that the note is a replacement note for one found to be defective or damaged during the printing process. To maintain the correct number of notes in a print run, the serial numbers are reclaimed and a star is added to note the replacement. Since Star Notes are replacements for errors, they are not as common as normal notes and are popular with collectors.