December
 2002 Issue
By James C. Johnston Jr.
Photos by Steven Vater

           As a historian, as well as a coin collector and dealer, I am in love with old paper. I also collect stamps, old letters, documents, books, and paper money. The history of modern nations can be seen in their paper money.

            Paper money was used in China many centuries ago. There is a story told about Marco Polo who returned to Italy after spending twenty-five years in China. His goods were being inspected by some figures in authority when one of the men picked up a piece of paper.

            “What is this Polo?” he asked.
            “That is money,” Marco Polo replied.
            “Well, is that so,” the official said as he plunged the paper into the flame of a candle.
            “You have just burned up 10,000 ounces of silver in the Chinese Imperial Treasury!”

            Most European nations issued paper banknotes by the Eighteenth century with various degrees of success. The paper money experience of the United States was unfortunate. The Revolution demonetized colonial banknotes issued under British rule. The paper money issued by the various colonies, and by the Continental Congress during the American Revolution, were rendered valueless shortly after there were printed.

            In my hometown of Franklin, Mass., the valueless paper money was placed in a special fund to pay the local Congregational minister, Dr. Nathaniel Emmonds. But today these notes are highly popular collector’s items. Some of Massachusetts’ colonial notes were signed by William Dawes. Dawes was an important Revolutionary War figure who rode with Paul Revere on his famous “Midnight Ride” to warn the countryside that the “British Were Coming.”

            Various banks, turnpike authorities, and other institutions issued paper banknotes in the early and mid-nineteenth century. Almanacs listed banknotes no longer valid as passable banknotes for one reason or another. A political battle between Nicholas Biddle and Andrew Jackson in the early 1830’s led to one of the greatest financial disasters the nation ever experienced.

            Nicholas Biddle was president of the Bank of the United States. He was from one of the great mainline families of Philadelphia. He was the highest of blue-blooded American aristocracy, and he controlled banking in the United States. Jackson disliked him and his class.

             Jackson came from the people.  He was an orphan who clawed his way up from the bottom of what was rural frontier society. He was self-educated and became a lawyer, landowner, Congressman, judge, and militia general. He was a hero of the Indian Wars and the man who crushed the British at the Battle of New Orleans on January 8, 1815.

This 500 pound note on the Bank of the United States was signed by Nicholas Biddle whom Jackson saw as both a political and personal enemy.

            He had seen his beloved wife Rachael painted as an immoral woman in the popular press in the most lurid sort of stories. Rachael had been beaten by her first husband and repeatedly abused by him. She fled to Jackson, sought a divorce, and thinking that she had gotten one, married Jackson. She committed bigamy because she did not know that her divorce had not been granted from her first husband.

            Her abusive first husband then got a divorce on the grounds of Rachael’s supposed immorality. Gossip followed her, along with the open snubs of “Good Society,” for the next thirty years. Jackson believed that the bigotry of Biddle’s class was responsible for his wife’s social ostracism and her death during the brutal and ruthless presidential campaign of 1828 when Rachael was attacked in the press more than Jackson himself.

            Jackson decided to punish his political enemies by casting a veto which killed the re-chartering of the National Bank. He crushed Biddle in the process. Biddle’s health failed him. Jackson pulled all government money out of the National Bank and deposited these same funds in banks friendly to him. These banks were called “Pet Banks.”

            Banks began issuing paper money as never before. Thousands of face-different bank-notes were issued all over the country. Banks issued paper money with a face value for greater than actual gold and silver deposits in their vaults.

            Jackson then issued the “Specie Circular” at the end of his term of office. This order stated that all taxes and other payments to the federal government had to be made in specie, gold and silver coin, as opposed to bank issued paper money.

            People rushed to banks to exchange their paper money for gold and silver. These banks ran out of gold and silver specie and failed by the hundreds causing a national depression. The numismatic legacy of this horrible financial disaster was a rich treasure of “Broken Banknotes.”  These are called Broken Banknotes because the banks which had issued them had gone “Bust.”

            The federal government issued paper money for the first time, under the Constitution, during the Civil War. These issues of paper money were called “Greenbacks”, because the reverses of these notes were printed in green ink. The Civil War era gave birth to widely accepted paper money which circulates to this day. These large banknotes are very popular with collectors.

            Also, of great interest is the fact that during the Civil War, northerners often salted away gold and silver coins, because they did not know who would win the war. The federal government issued both postal currency and fractional currency in denominations of one cent, three cents, five cents, 10 cents, 15 cents, 25 cents, and 50 cents because coins were being hidden away and small change was needed.

            The Confederate States and the individual southern states also issued banknotes. This paper money fell in value. Some lower denomination notes were cut up and higher denominated notes printed on them. At the end of the war in 1865, these bits of paper money had no value at all.

            In the last ten years or so, Confederate paper money has become far more valuable. Much of this has to do with Ken Burn’s Civil War series on P.B.S.

            Paper money is wonderful to collect. It is a part of real history which can be held in ones hand. It is amazing to hold a piece of paper money which actually circulated during the American Revolution and the Civil War and was held, in turn, by people of that time period.