The history of the Dollar

Colonial and Continental Currency

Extremely rare series of 1880 note with Lyons-Roberts signatures and a small red scalloped seal. The head is of DeWitt Clinton, Governor of New York, Mayor of New York City, U.S. Senator. Seated figure is Christopher Columbus.

The Massachusetts Bay Colony issued the first paper money in the colonies in 1690. Other colonies soon followed suit to meet the high demand for money fueled by trade between the colonies and the scarcity of coin (which was the common form of money up to this date). Some of this early money was readily accepted, but some was not redeemed in gold or silver as promised and thus depreciated rapidly. These currencies, however, set a precedent for the first national currency which was issued during the War for Independence.

To finance the Revolutionary War, the Continental Congress in 1775 authorized the limited issuance of paper currency. These notes, called Continentals, were denominated in dollars and backed by the "anticipation" of future tax revenues, with no backing in silver or gold. They could be redeemed only upon the independence of the colonies. Continentals were an interesting expression of the new nation's sovereignty, as they did not feature pictures of the crown or King of England. In fact, some were printed from plates engraved by Paul Revere to read "The United Colonies" and bore pictures of colonial minutemen.

Without solid backing and with rising inflation, the Continentals soon became worthless, thus the expression "not worth a Continental." Or, as George Washington put it, "A wagonload of currency will hardly purchase a wagonload of provisions." In 1777 after the Declaration of Independence was signed, the first notes bearing the words "The United States" were issued and signed by well-known revolutionary figures to give them credibility.

Free Banking Era

In 1791 the Bank of the United States received a charter to operate until 1811, followed by the Second Bank of the United States from 1816 to 1836. These two banks, chartered by Congress rather than a state, performed several central bank functions. Although privately owned, they were authorized to issue paper bank notes and serve as the fiscal agent of the government. Both banks, however, were unpopular with those wanting easy credit-primarily the western, agrarian interests-and in 1832 Andrew Jackson vetoed the recharter of the Second Bank.

Thus followed the "Free Banking Era"-a quarter century in which American banking was a hodgepodge of state-chartered banks with no federal regulation or uniformity in operating laws. State Bank notes of various sizes, shapes, and designs were in circulation. Some of them were relatively safe and exchanged for par value and others were relatively worthless as speculators and counterfeiters flourished. By 1860, an estimated 8,000 different state banks were circulating "wildcat" or "broken" bank notes in denominations from Ѕ cent to $20,000. The nickname "wildcat" referred to banks in mountainous and other remote regions that were said to be more accessible to wildcats than customers, making it difficult for people to redeem these notes. The "broken" bank notes took their name from the frequency with which some of the banks failed, or went broke.

Gold and Silver Certificates

The economy was in turmoil in the late 19th century. The government, in a move to increase its reserve of precious metals, offered certificates in exchange for deposits of silver and gold. Gold certificates, colorful and vivid, were first issued in 1863 and put into general circulation in 1882. They are among the most attractive of all currency issues, with the reverse a brilliant golden orange, symbolic of the gold coin they represent. In 1933, when the country faced a severe depression and a banking crisis, the public began to demand gold. Runs developed on both Federal Reserve Banks (which had been established under the Federal Reserve Act in 1913) and commercial banks. In order to deal with this crisis, only Federal Reserve Banks were permitted to hold gold. In 1934, Federal Reserve Banks were required to turn over all gold coin, bullion, and certificates to the U.S. Treasury in return for a new type of gold certificate. These were never put into circulation and the last ones were printed in January 1935. In 1964, private citizens could once again hold gold certificates issued before January 30, 1934, but they could no longer be redeemed in gold. This changed in 1974, and private U.S. citizens could once again hold gold legally.

A New Look for Currency

In 1990 a new series of notes was introduced to improve security and stay ahead of counterfeiters and advances in technology which make it easier to reproduce currency. These notes include microprinting and an embedded security strip. A more complete redesign is being introduced starting with the issue of new $100 bills early in 1996 and will continue as new designs for the lower denominations are introduced at intervals of about a year. The most noticeable changes in the $100 bill are that the portrait of Benjamin Franklin is larger and off center and the borders are simplified. This creates more space to incorporate a watermark in the paper to the right of the portrait depicting the same historical figure as the portrait.

Other new or modified features include the use of a unique security thread which glows red when exposed to ultraviolet light, color-shifting ink, microprinting, and fine-line printing. A universal Federal Reserve seal appears on the new note, rather than an individual seal for each Reserve Bank. This is expected to create some efficiencies in production ad inventory.