The History of Paper Money in America

Modern American paper money.

According to the Federal Reserve Bank of San Francisco, the first currency in Colonial America was produced by the Massachusetts Bay Colony in 1690. Soon other American colonies followed. Paper money did not eliminate barter, as trading goods was common through the 1800s.

Revolutionary America

The Continental Congress held no taxing powers, thus to finance the Revolutionary War, it began circulating its own currency in 1775. By the end of the war, a number of private paper money issues were in circulation and The First Bank of the United States was designated by Congress to "issue paper bank notes" and create a uniform money system.

Civil War America

During the American Civil War, the Confederate government issued millions of dollars in paper currency. After the war ended it held no exchange value.

Legal Tender

Dire economic conditions following the Civil War prompted Congress to pass the Legal Tender Act of 1862, which led to the first national fiat money (not convertible to specie) being declared legal tender in the U.S. Known as "greenbacks," this paper money became convertible in 1879 and was continually produced until 1966.

Contemporary Paper Money

The Federal Reserve was established as the national central bank in 1913. A year later Federal Reserve notes, the paper money Americans use today, were first issued.

References

• Federal Reserve Bank of San Francisco: Historical American Currency Exhibit
• "The Oxford Companion to United States History"; Paul S. Boyer, Editor; 2001.
• U.S. Treasury: Treasury History Overview