The History of Paper Money

1690: Colonial Notes
In the early days of this nation, before and just after the American Revolution, Americans used English, Spanish, and French currencies. The Massachusetts Bay Colony issued the first paper money in the colonies which would later form the United States.

Continental Currency
American colonists issued paper currency for the Continental Congress to finance the Revolutionary War. The notes were backed by the “anticipation” of tax revenues. Without solid backing and easily counterfeited, the notes quickly became devalued, giving rise to the phrase “not worth a Continental.”

Nation’s First Bank
The Continental Congress chartered the Bank of North America in Philadelphia as the nation’s first “real” bank to give further support to the Revolutionary War.

The Dollar
The Continental Congress adopted the dollar as the unit for national currency. At that time, private bank note companies printed a variety of notes.

Second U.S. Bank
After adoption of the Constitution in 1789, Congress chartered the First Bank of the United States until 1881 and authorized it to issue paper bank notes to eliminate confusion and simplify trade. The bank served as the U.S. Treasury’s fiscal agent, thus performing the first central bank functions.

Second U.S. Bank
The federal monetary system was established with the creation of the U.S. Mint in Philadelphia. The first American coins were struck in 1793.

Second U.S. Bank
The Second Bank of the United States was chartered for 20 years until 1836.

State Bank Notes
With minimum regulation, a proliferation of 1,600 state chartered, private banks issued paper money. State bank notes, with over 30,000 varieties of color and design, were easily counterfeited. That, along with bank failures, caused confusion and circulation problems.

Civil War
On the brink of bankruptcy and pressed to finance the Civil War, Congress authorized the United States Treasury to issue paper money for the first time in the form of non-interest bearing Treasury Notes called Demand Notes.

Demand Notes were replaced by United States Notes. Commonly called “greenbacks,” they were last issued in 1971. The Secretary of the Treasury was empowered by Congress to have notes engraved and printed by private bank note companies. The notes were signed and affixed with seals by six Treasury Department employees.

The Design
The design of U.S. currency incorporated a Treasury seal, the fine-line engraving necessary for the difficult-to-counterfeit intaglio printing, intricate geometric lathe work patterns, and distinctive cotton and linen paper with embedded red and blue fibers.

Gold Certificates
Gold Certificates were issued by the Department of the Treasury against gold coin and bullion deposits and were circulated until 1933.

Secret Service
The Department of the Treasury established the United States Secret Service to control counterfeiting. At that time, counterfeits were estimated to be one-third of all circulating currency.

National Bank Notes
National Bank Notes, backed by U.S. government securities, became predominant. By this time, 75 percent of bank deposits were held by nationally chartered banks. As State Bank Notes were replaced, the value of currency stabilized for a time.

Bureau of Engraving and Printing
The Department of the Treasury’s Bureau of Engraving and Printing started printing all U.S. currency.

Silver Certificates
The Department of the Treasury was authorized to issue Silver Certificates in exchange for silver dollars. The last issue was in the Series 1957.

1913: Federal Reserve Act
After the 1893 and 1907 financial panics, the Federal Reserve Act of 1913 was passed. It created the Federal Reserve System as the nation’s central bank to regulate the flow of money and credit for economic stability and growth. The System was authorized to issue Federal Reserve Notes, now the only U.S. currency produced and representing 99 percent of all currency in circulation.

Standardized Design
Currency was reduced in size by 25 percent and with uniform portraits on the front and emblems and monuments on the back.

In God We Trust
Paper currency was first issued with “In God We Trust” in 1957. The inscription appears on all currency Series 1963 and later.

1990: Security Thread and Microprinting
A security thread and microprinting were introduced to deter counterfeiting by advanced copiers and printers. The features first appeared in Series 1990 $100, $50 and the $20 notes. By Series 1993, the features appeared in all denominations except $1 notes.

Currency Design
The Secretary of the Treasury announced that U.S. currency would be redesigned to incorporate a new series of counterfeit deterrents. The newly designed $20 are being issued in 1998. The new $50 were issued in 1997 and the new $100 notes were issued in 1996. The new $50 was the first to incorporate a low-vision feature.