More than a thousand years ago, China introduced the concept of paper money. But the idea was a bit too sophisticated for most of the world in the Middle Ages. Later, powerful banking institutions developed the concept of letters of credit, which could be taken to various branches of what amounted to early banks. By the 17th century, some governments entered the lists. By the 18th century, the Bank of England issued bank notes backed by gold and the power of a global empire.
Paper money in the Unites States had a less happy history. The paper notes issued during the Revolution were of no value. This fact gave rise to an expression regarding the widely issued Continental bank notes, “Not worth a Continental,” meaning something of no value whatsoever.
During the first two thirds of the 19th century, banks, trading companies, and other entities issued bank notes. “Wildcat banks” sprung up and went “bust.” Their issued notes were then without value. Indeed, they were not were not worth a “Continental,” because there was nothing to back then up.
When President Andrew Jackson decided to break “the National Bank” because its president, Nicholas Biddle, had joined forces with the anti-Jackson elements. He did so by removing public funds from Biddle’s bank. He then placed the government’s money in the banks that had supported him. They were called “pet banks.”
These pet banks issued a lot of pretty paper money far in excess of their gold and silver resources. When the United States government issued an order called the “Specie Circular,” stating that all money owed to the government has to be paid in “specie,” or silver and gold. The paper money had no value.
There were “runs” on the banks, and people rushed to them to redeem their paper money for gold and silver. In a short time, the banks ran out of specie and they closed their doors. This left hundreds of thousands of people with nothing but worthless money.
The United States government began to issue paper, money during the Civil War to help fund its military operations. Even these notes were sometimes discounted for gold and silver until the government’s “greenbacks” proved their worth. “greenback’ was the name assigned to the Federal notes, because the reverse of the notes were printed in green ink.
One of the most interesting groups of paper notes issued during the Civil War were in denominations of three, five, 10, 15, 25, and 50 cents. Now comes the question, “Why issue notes in these denominations when coins of these sums were minted and in circulation?”
The answer is that a lot of people were uncertain about who would win the war. Whoever lost would have paper money of no value. Ordinary people began to hoard gold, silver, and even copper coins. Thus the U.S. government issued postal currency and fractional currency.
The postal currency carried images of the new U.S. postage stamps of 1861, which replaced the series of 1857. The reason that the government introduced a new series of stamps in 1861 is that vast stores of U.S. series 1857 stamps were still held by Confederate post offices. This postal currency was supposed to be used to buy stamps.
Fractional currency, however, was to be used to replace the small change and half dollars that were being hoarded by a frightened people. These little notes are well engraved and cause many who see them to gasp. Most have no idea that the U.S. government ever issued such diminutive curiosities.
The Confederate States of America also issued a large amount of paper money between 1861 and 1865. Always short of funds and specie, the paper streamed from government-contracted presses for the C.S.A.
Not to be left out, the Confederate States also issued notes in great profusion. At the end of the war, this flood of bank notes was only wastepaper. Today they have both historic and cash value. Many of these Confederate notes were printed on cheap paper and even on other, recycled bank notes. After the Civil War, the only entity left issuing bank notes was the United States government. This paper money, backed by the nation itself, continues to the present time.
But many were still afraid of paper money after the end of the Civil War. In fact, it seems that the Republicans became married to gold. The Populists, Granger, Democratic, and, yes, “Greenback Party” promoted silver, as did the Free Silver party, and the printing of lots of paper money. Their point was that gold and silver was concentrated on the East Coast, and to a lesser degree, the West Coast. If money was to get into the hands of “real people,” the government had to issue more paper notes.
This fiscal question split the nation until the end of the 19th century and prompted one of the most celebrated speeches of the third of the century. “The Cross of Gold” propelled William Jenning Bryan’s nomination as the presidential candidate of the Democratic, Populist, and Greenback Parties in 1896. But alas, he lost to the pro-gold Republican William McKinley.
Gold’s day was done. There just was not enough to go around and keep up with the bursting mega-power economy of the United States. By 1900, the U.S. outstripped the German Empire in the production of steel and became the world’s economic leader. This has been the reality ever since. The legacy of paper money provides a wonderful opportunity to build a great collection of truly historic items.
If you Journal readers want to catch up with me, this is where I will be:
On Sunday, May 23, I will be at Tom Lacey’s greater Worcester Coin Show at the Best Western Yankee Drummer Hotel in Auburn, Mass. It is located on Route 12 on exit 10 on the Mass Pike. Show hours are 9:00 a.m. to 3:00 p.m. On Sunday, June 6, I will be at Richard Murphy’s N.E.S.S. Coin and Stamp show at the Holiday Inn on Route 128 near the intersection of Route 1. Show hours are 9:00 a.m. to 3:00 p.m.
On Sunday, June 13, I will be at Ernie Botte’s Coin and Stamp Show at the Westford Regency Inn. To get there, take exit 32 off Route 495. Proceed to Route 110 to Westford. I will look forward to seeing all you Journal readers there.