History of Paper Money
In ancient times, money was made into coins of precious metals of different weights. These coins could be exchanged for goods and services of equal value. It did not take long for these precious metals to become scarce. The Chinese invented paper money around 700 A.D. Today, paper money is used world-wide.
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Flying Money
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In 812 A.D,. the emperor of China could no longer use copper to create Chinese coin due to a copper shortage. To remedy the situation, paper money was traded instead of copper. The paper money depicted the amount of copper coins it could be exchanged for. In 970 A.D., the so-called "Flying Money" became the currency of China. However, it was printed in such large quantities that China suffered inflation. By the year 1455, China stopped the production of paper money.
Paper Money in Europe
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The first paper mill came to what is now Spain in 1151. In the late 12th century, the Stockholm Bank of Sweden began issuing the first European bank notes. People could leave their coins and metal at the bank in exchange for these promissory bank notes. These notes could be redeemed for coin, or exchanged as currency.
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Paper Money In the New World
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Before the Revolutionary War, colonists used British currency or individually backed promissory notes called dollars. The American colonies needed their own currency to finance the Revolutionary War and sever their ties from Britain. The Massachusetts Bay Colony printed the first American paper currency that was backed by the government in 1690. By 1775, the Continental Congress issued paper money called Continentals. Continentals were backed by the tax revenue the new government expected to receive. This form of paper money was practically worthless because there was no assurance in the promise of expected tax revenue. Each state began to issue its own currency.
Post War Money
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After the signing of The Declaration of Independence, the United States was able to print universal currency backed by gold and silver. These notes were issued by banks acting on behalf of the government to individuals and businesses. The notes could only be redeemed by the issuing bank. There was no uniformity in the appearance of the paper money, and it was easily counterfeited. The punishment for counterfeiting money was death, and "Death to Counterfeiters" was printed directly on the money. The money was rarely returned to the bank it was issued from, causing the banks to go broke. This gave these notes the name "Broken Currency."
Silver Certificates
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In 1863, Abraham Lincoln created the National Banking Act. This created one uniform paper currency that was issued by government banks. These notes were backed by the U.S. Treasury. The Confederacy issued its own currency that was not recognized by the Union. When the Union won the war, the Silver Certificates were used throughout the United States. These notes were called legal tender and were good for both public and private debts. The Silver Certificate could also be exchanged for silver. They were printed with green ink, and very much resemble the money we use today.
Modern Paper Money
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Dollar bills as we know them are called Federal Reserve Notes, and were first printed in 1915.
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- Photo Credit AMaqill
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Comments
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Mar 13, 2011
Yes but Federal Reserve Notes aren't money. They're bits of paper. You can't swap them for gold or silver. So they're worthless.
