Merchant Services: The History Of US Currency, Part 2
United States Notes
A United States Note was similar in appearance to modern paper money. Also referred to as Legal Tender Notes, they were in circulation from 1862 until 1971. The wording printed on the face of the bills led to their being known as Legal Tender Bills; “This Note is a Legal Tender”. That statement obligated the government to uphold their value and to back the amount issued with the amount of gold in reserve. Although they ceased to be printed in 1971, they are still considered legal tender but are very rare. They were replaced by the current form of paper money, the Federal Reserve Note.
1971 and the death of the United States Note ended the policy of issued paper money being backed by gold. Up until that time, actual gold had to be held in reserve equal to the amount of paper money issued. Once paper money ceased to be backed by gold, the currency in the US became fiat currency. From the Latin meaning “let it be done”, fiat money has value only because the issuing government says so. The only form of backing this money possesses is through laws governing its value. People residing in a country will accept the fiat money as having value only so long as the confidence in that government remains high enough.
Color and Design
Throughout the relatively short history of paper money in the US, the design has changed many times. For example, prior to 1929 the paper bills were substantially larger. At one point, there were over 30,000 combinations of design and color, which only served to help counterfeiters. Throughout the 20 th century, Red Seal notes were printed and issued. A type of United States Note, they were so named because of the red seal and red serial numbers on the face of the bills. Recently, the Treasury released redesigned bills in 5, 10, 20 and 50 dollar denominations (the new 100 dollar bill is on the way). They all feature new anti-counterfeit features such as colored watermarks, color shifting ink, and a three-dimensional security ribbon embedded in the paper.
The first appearance of coins came from the newly established US Mint in 1792. Created as a way to fraction a paper dollar, the current denominations are .01, .05, .10, .25 and .50 of a dollar. Also in circulation are one dollar gold coins and Susan B. Anthony one dollar coins. Many different commemorative and other designs have been issued throughout the short history of coins. Coins such as the Indian Head and Buffalo Nickels, Liberty Dimes and the Sacajawea Golden Dollar have all had limited runs. Today these types of coins are valued by collectors but still retain their face values with the Federal Reserve.
The history of money in the United States predates the founding of the country itself. There is much history to be learned and studied pertaining to the financial system in place in the country. Below are some links with additional and more detailed information should you want to learn more.
- Currency History – The history of the country’s money, told from the Bureau of Engraving and Printing.
- Gold Standard Act – Read the full text of the legislation that became the Gold Standard Act of 1900.
- US Treasury – A history of the Treasury Department from the Revolutionary Period through the development of the Department.
- Money History – The Secret Service’s history of US money about the United States Notes and Federal Reserve Notes.
- Fiat Money – A general history of money with an informative section on the fiat standard.
- New Money – Learn a little about the history of the currency, and a lot about the future of the currency.
- US Mint – The Mint homepage pertaining to coins, with production schedules, circulating coins and much more.
- Federal Reserve – The homepage of the Federal Reserve Bank, the central banking institution for the US government.