Civil War

Rare gold certificate, payable in gold coin, with the head of Lincoln.

In 1861, to finance the Civil War, Congress authorized Demand Notes--the first issue of paper money by the government since the Continentals. These Notes were printed in $5, $10, and $20 denominations, redeemable in coins on demand, and green in color--hence the name "greenbacks." A total of about $10 million was issued, a relatively small series. These notes, and all paper money issued since 1861, are still valid and redeemable in current cash at face value. While most early money is now in the hands of collectors or museums, it is important to note the record of currency stability which this represents.

In 1862, Congress discontinued issuing Demand Notes and issued Legal Tender Notes, also known as United States Notes. These new notes--issued in denominations from $1 to $1,000 (later $5,000 and $10,000)--were the first national currency used as legal tender for most public and private debts. The design of these notes incorporated a Treasury seal, fine-line engraving, intricate geometric lathe work patterns, and later incorporated various forms of distinctive cotton and linen papers with embedded red and blue fibers. Confidence in the notes waned somewhat when the Treasury stopped redeeming them in coins during the Civil War to save gold and silver. However, redemption resumed in 1879 following the war.

Coin hoarding and the need to use metals for war purposes created a shortage of coin during the Civil War and led to the circulation of small change substitutes. In some cases these included tickets, bills, and even postage stamps. From 1862 to 1876 the government issued more than $368 million in Fractional Currency in three-to fifty-cent denominations. These "paper coins," which were much smaller in size than our present currency, were nicknamed "shinplasters," as the hardships of war often forced troops to line their worn-out boots with them. These fractional notes are still redeemable today.

Between 1861 and 1865 Confederate currency was being issued to millions of Southerners, gambling that a Confederate victory would ensure the currency would be redeemable. In an effort to debase this currency, the North printed counterfeit Confederate money and circulated it in the south. Inflation was soon rampant in both the north and south, but far worse in the Confederacy. As the end of the war neared, Confederate citizens completely lost confidence in their currency and came to rely on barter or black-market greenbacks. In some cases Confederate soldiers were even paid in Northern greenbacks. By the end of the war, Confederate notes were totally worthless.

National Bank Act

Issued from 1919 to 1921, only in Ohio and Louisiana. At the left is Washington crossing the Delaware. At the right is Washington at prayer. This is one of four known specimens.

President Abraham Lincoln, urged by the Secretary of the Treasury, convinced Congress to pass the National Banking Act in 1863 which established a national banking system and a uniform national currency to be issued by the new "national banks." The banks were required to purchase U.S. government securities as backing for their National Bank Notes. In 1865 a 10-percent tax was levied on State Bank notes eliminating the profit in issuing them and basically taxing them out of existence.

Although United States Notes were still widely accepted as a medium of exchange, most paper currency circulating between the Civil War and World War I consisted of National Bank Notes. They were issued from 1863 through 1932. From 1863 to 1877 National Bank Notes were printed by private bank note companies under contract to the Federal government. The Federal government took over printing them in 1877.

Gold and Silver Certificates

Extremely rare silver certificate, series of 1878, payable at New York. James Monroe.

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.