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United States
Notes/Legal Tender Notes
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United States Notes are also known as Legal Tender Notes
because of the wording of the obligation. These notes are the 2nd
earliest type and longest issued U.S. paper currency to date. The
issuance of these notes stirred a great deal of Constitutional
debate over the legality of notes backed only by the credit of the
U.S. government.
Large
Size U.S. Notes consisted of 5 issues from 1862 to 1923. All
series were titled "United States Note" except for the
series of 1869 which were titled "Treasury Note" and the
series of 1862-1863 which had no title on the note. The wording of
the obligation carried on the reverse of the notes was changed
several times during the entire issue.
The first issue, dated March 10, 1862 consisted of all
denominations from $5 to $1,000. The earlier notes in this series
carry the following obligation:
"This note is legal tender for all debts, public and
private, except duties on imports and interest on the public debt,
and is exchangeable for U.S. six per cent twenty year bonds,
redeemable at the pleasure of the United States after 5
years."
Later notes in this series, as well as notes from the second
and third issue carry the following obligation:
"This note is legal tender for all debts, public and
private, except duties on imports and interest on the public debt,
and is receivable in payment of all loans made to the United
States."
The second issue was dated August 1, 1862 and only issued in
denominations of 1 and 2 dollars.
The third issue was dated March 10, 1863 and were issued in all
denominations from $5 to $1,000 dollars.
The fourth issue, authorized by an Act of Congress on March 3,
1863 were issued in denominations from $1 to $10,000. Series dates
consisted of 1869, 1874, 1875, 1878, 1880, 1907, 1917, and 1923.
All of these notes carried the following obligation:
"The United States will pay to bearer __ dollars. This
note is legal tender at its face value for all debts public and
private, except duties on imports and interest on the public
debt."
| Series 1869 |
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| Series 1875 |
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| Series 1878 |
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| Series 1880 |
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| Series 1907 |
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| Series 1917 |
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| Series 1923 |
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The fifth issue, authorized by the Legal Tender Act of 1862 and
1863, consisted only of the series 1901 $10 note. (The Bison Note)
The obligation on these notes was worded as follows:
"The United States of America will pay to the bearer ten
dollars. This note is a Legal Tender for ten dollars subject to
the provisions of Section 3588 R.S. This note is a Legal Tender at
its face value for all debts public and private except duties on
imports and interest on the public debt."
Small
Size United States Notes were issued in series 1928, 1953,
1963, and 1966 in denominations of $1, $2, $5 and $100, but not
all denominations were issued for all series. The obligation
carried on series starting in 1928 read as follows:
"This note is legal tender at its face value for all debts
public and private except duties on imports and interest on the
public debt."
The wording was changed again by an act of Congress on May 12,
1933 to read:
"This note is legal tender at its face value for all debts
public and private"
The wording was changed still again with the series of 1963 to
read:
"This note is legal tender for all debts, public and
private"
The Act of May 3, 1878 required that circulation be maintained
at $346,681,016. This was accomplished by the Treasury, in recent
years, by moving the necessary amounts of the small size $100
notes, which were last printed in 1969, from one vault to another.
This remained in effect until 1993 when the Legal Tender
regulations were repealed. In 1996, disregarding talk of selling
the obsolete small size $100 U.S. Notes to collectors, the
remaining notes were destroyed.
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Silver
Certificates
Silver Certificates were authorized by Congressional Acts of
Feb. 28, 1878 and Aug 4, 1886. In 1878, the U.S. economy was doing
quite well and the need for silver coinage outstripped the
available supply. The idea was not to replace coins, but to create
an easier method of exchange. The government would hold the
equivalent amount of silver coins and bullion and promise to
redeem the certificates on demand.
Due to the Silver Purchase Act of 1934, the redemption clause
was changed to allow redemption in Silver Dollars or Silver
bullion and in March 1964, the Secretary of the Treasury halted
redemption in Silver Dollars. Silver Certificate legislation was
abolished by Congressional Act June 4, 1963 and all redemption in
silver was halted in June 24, 1968.
Large
Size Silver Certificates consisted of 5 issues.
The first issue consisted of series 1878 and 1880 in
denominations from $10 to $1,000. The obligation on these notes
read, "This certifies that there have been deposited with
the Treasurer of the U.S. at Washington D.C. payable at his office
to the bearer on demand ___ silver Dollars. This certificate is
receivable for customs, taxes and all public dues and when so
received may be reissued."
The second issue consisted of series 1886, 1891, and 1908 in
denominations of $1 to $1,000.
| Series 1886 |
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| Series 1891 |
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| Series 1908 |
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The third issue consisted of the "Educational" series
1896 in denominations of $1, $2, and $5.
The fourth issue was series 1899 in denominations of $1, $2,
and $5 (One Papa).
The fifth issue of 1923 was printed in denominations of $1 and
$5 (Porthole).
The obligation on the last four series of large size silver
certificates read, "This certifies that there have been
deposited in the Treasury of the United States ___ silver Dollars
payable to the bearer on demand. This certificate is receivable
for customs, taxes and all public dues and when so received may be
reissued."
Small
Size Silver Certificates were issued in denominations of $1,
$5 and $10 in series 1928, 1933, 1934, 1935, 1953, and 1957. The
obligation on the 1928 series silver certificates stated that they
were redeemable for "One Silver Dollar", which was
changed in 1934 to read "One Dollar in Silver."
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Gold Certificates
Gold Certificates were authorized by the Currency Act of March
3, 1863 and were issued in series from 1865 to 1934. The earlier
Gold Certificates, due to their higher face values, were not
intended for general circulation, but were used almost exclusively
in interbank channels to settle gold accounts.
70 years after being authorized, Gold Certificates met their
demise by the Gold Reserve Act of 1933. On December 28, 1933 the
Secretary of the Treasury, Henry Morgenthau, Jr., issued an order
forbidding the holding of Gold Certificates and required their
surrender. Banks were ordered to turn in all stocks of gold
certificates as well as the general public. A provision had been
made for collectors allowing them to retain their collection of
gold coins, but this provision did not include Gold Certificates.
Finally, 31 years later on April 24, 1964, the Secretary of the
Treasury, C. Douglas Dillon, issued regulations removing all
restrictions on the acquisition or holding of Gold Certificates
which were issued by the US Government prior to January 30, 1934.
This covered notes up to Series 1928 only.
LARGE SIZE
Large
Size Gold Certificates consisted of 9 issues and were
authorized by the Currency Act of March 3, 1863. The first,
second, third and sixth issues were mainly used between banks and
clearinghouses and not intended for general circulation.
The first issue was printed in denominations of $20, $100,
$500, $1,000, $5,000 and $10,000 and is extremely rare. The
obligation on the first and second issues read; "It is hereby
certified that ___ dollars have been deposited with the Assistant
Treasurer of the United States in New York payable in gold at his
office to the bearer."
The second issue was printed in denominations of $100, $500,
$1,000, $5,000 and $10,000 with only one example of the $500 note
known.
The third issue consisted of series 1875 and was printed in
denominations of $100, $500 and $1000 and was a blank back uniface
design. The obligation on the third issue read; "It is hereby
certified that ___ dollars have been deposited with the Assistant
Treasurer of the United States payable in gold at his office to
the order of ...." These notes were countersigned and dated
by hand.
Gold Certificates entered general circulation with the fourth
issue and the obligation was changed to read:
"This certifies that there have been deposited in the
Treasury of the United States of America ___ Dollars in gold coin
repayable to the bearer on demand." The word
"repayable" was replaced with "payable" after
series 1882. Series 1922 also bore the following: "This
certificate is a legal tender in the amount thereof in payment of
all debts and dues public and private. Acts of March 14, 1900, as
amended and December 24, 1919."
The fourth issue consisted of series 1882 and was printed in
denominations of $20, $50, $100, $500, $1,000, $5,000 and $10,000.
The fifth issue consisted of series 1888 and was printed in
denominations of $5000 and $10000.
The sixth issue consisted of series 1900 and was printed in a
$10,000 denomination only. This issue was used primarily between
banks and clearing houses.
The seventh issue consisted of the following series and
denominations:
Series 1905 $20 (Considered the most beautiful Gold Certificate
because of a red seal and serial numbers and on the back, gold
tinted center and gold border.)
Series 1906 $20
Series 1907 $10
The eighth issue consisted of series 1907 in a $1,000
denomination only.
The ninth issue consisted of the following series and
denominations:
Series 1913 $50
Series 1922 $10, $20, $50, $100, $1,000
SMALL SIZE
Small
Size Gold Certificates consisted of three series. The seals
and serial numbers continued to be printed in gold ink, but the
back lost the distinctive gold color and used the standardized
green rear design of the other small size notes.
The obligation was changed to read: "This certifies that
there have been deposited in the Treasury of the United States of
America ___ Dollars in gold coin payable to the bearer on
demand." "This certificate is a legal tender in the
amount thereof in payment of all debts and dues public and
private."
Series 1928 was printed in denominations of $10, $20, $50,
$100, $1,000, $5,000 and $10,000.
Series 1928A was printed in denominations of $10, $20 and $100,
but were never released to the public. BEP records indicate that
notes were delivered, but none appear to have been released to the
public. There is some discrepancy as to whether these notes were
destroyed or whether they are in a storage vault at the United
States Treasury building in Washington, DC.
Series 1934 was printed in a $100,000 denomination only which
was intended for use only in fiscal channels and was never
released to general circulation. This would make them illegal to
be held even by collectors.
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History of paper money Paper money originated in two forms: drafts,
that is receipts for value held on account, and "bills",
which were issued with a promise to convert at a later date. Money is
based on the coming to pre-eminence of some commodity as payment. The
oldest monetary basis was for agricultural capital: cattle and grain.
In Ancient Mesopotamia, drafts were issued against stored grain as a
unit of account. A "drachma" was a weight of grain. Japan's
feudal system was based on rice per year – koku. At the same time,
legal codes enforced the payment for injury in a standardized form,
usually in precious metals. The development of money then comes from
the role of agricultural capital and precious metals having a
privileged place in the economy. However the use of paper money as a
circulating medium is intimately related to shortages of metal for
coins. In the 600s there were local issues of paper currency in China
and by 960 the Song Dynasty, short of copper for striking coins,
issued the first generally circulating notes. A note is a promise to
redeem later for some other object of value, usually specie. The issue
of credit notes is often for a limited duration, and at some discount
to the promised amount later. The original notes were restricted in
area and duration, but the Yuan Dynasty, facing massive shortages of
specie to fund their occupation of China, began printing paper money
without restrictions on duration. By 1455, in an effort to rein in
economic expansion and end hyperinflation, the new Ming Dynasty ended
paper money, and closed much of Chinese trade. In Europe the first
banknotes were issued by Stockholms Banco, a predecessor of the Bank
of Sweden, in 1660, although the bank ran out of coins to redeem its
notes in 1664 and ceased operating in that year. It was 1694 when the
Bank of England issued the first permanently circulating banknotes.
The use of fixed denominations and printed banknotes came into use in
the 18th century. Most banknotes are made of heavy paper, sometimes
mixed with linen, cotton, or other textile fibers. Some countries
including Mexico and Australia produce polymer banknotes made from
plastic in order to improve wear and tear, and permit the inclusion of
a small transparent window a few millimeters in size as a security
feature that is very difficult to reproduce using common
counterfeiting techniques. DOLLAR, name of various coins and paper
money formerly or currently in use in parts of Europe, Africa, Asia,
Oceania, and the western hemisphere. It is the standard value, or unit
of account, in the monetary systems of Canada and the U.S. The U.S.
dollar also plays a central role in the international monetary system.
The word dollar comes from the old German Daler or Taler, an
abbreviation of joachimsthaler, the name of a silver coin, imprinted
with an effigy of St. Joachim, which was first struck (1519) in what
is now Germany. Later, a large milled-edged silver coin called peso
duro (hard dollar as it is known in English) was minted in Spain and
widely used in the Spanish and English colonies of the New World.
Canadian Dollar. The Currency Act, passed in 1853 and proclaimed a
year later, set the value of the Canadian dollar at 23.22 gr of gold;
although the legislation had initially required that all provincial
accounts be based on a decimal system of dollars and cents, under
pressure from the British government a dual system that also allowed
accounts to be kept in pounds, shillings, and pence was eventually
authorized. Following confederation in 1867, the matter was resolved
with the passage of the Uniform Currency Act (1871), in which Canada
unequivocally adopted the decimal system of coinage; dollars, cents,
and mills were defined as the denominations of Canadian currency.
Canada remained on the gold standard until the outbreak of World War I
(1914), when convertibility was suspended. The nation returned to the
gold standard in 1926, but in the midst of a worldwide depression
Canada banned gold exports in 1931 and barred redemption of the dollar
for gold in 1933. A floating exchange-rate system has prevailed since
1970. U.S. Dollar. After the American Revolution, the Continental
Congress adopted the decimal system of coinage. The first dollars
minted in the U.S. were issued by the federal government in
Philadelphia in 1794, following passage of the Coinage Act of 1792.
The act provided for two standards of value: a silver dollar
containing 371.25 gr of pure silver and a gold dollar containing 24.75
gr of pure gold. The gold dollar, a very small coin, was minted only
from 1849 to 1889. Over the years revisions in the coinage law have
changed the silver and gold content in the dollar. A congressional
enactment in 1900 established the gold dollar as the monetary standard
of value in the U.S., thereby fixing the value of legal-tender paper
money in terms of the metallic gold dollar. Before 1934, paper
currency was backed by full-weight gold (or silver) coins; that is, it
could be redeemed for metallic money containing gold or silver.
Following the passage of the Gold Reserve Act of 1934, the gold
content of the dollar was reduced to 13.71 gr; all gold coins and
paper-money gold certificates except those in the hands of coin
dealers and private collectors were called in by the federal
government and exchanged for other forms of the national currency of
equal face value; and the coining of gold pieces was officially
discontinued. At that time, about $311 million in gold pieces was in
circulation. Since then, circulating currency, both paper and coin,
has been FIAT MONEY, (q.v.), the worth of which is derived from its
purchasing power rather than from its redeemable value. The U.S.
dollar has officially been devalued (see DEVALUATION,) several times
since the Gold Reserve Act. During the 1970s the value of the dollar
dropped sharply against more stable currencies, while the price of
gold climbed. The U.S. economic recovery of the early 1980s reversed
this pattern. During the 1990s, the extraordinary expansion of the
U.S. economy, combined with a sustained recession in Japan, made the
dollar by far the strongest currency in the world. Faced with an
economic crisis in early 2000, Ecuador began phasing out its own
monetary unit, the sucre, and embraced the U.S. dollar as its national
currency. Silver dollars continued in circulation until 1965, when
they almost disappeared because the value of their silver content
exceeded their face value. Beginning in 1975, U.S. citizens were
allowed to own, buy, and sell gold as a commodity, but gold coins
could not circulate as money.
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Learn More
About Currency
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CURRENCY, in economics, term designating all the circulating media
of exchange of a country. In this sense, currency includes coins and
paper money. The term sometimes includes credit instruments. Coins are
generally designated as metallic currency, and paper money and credit
instruments as paper currency. Further distinctions are made in the
latter classification: Government notes are called government
currency; bank notes are designated as bank currency; and checks drawn
on bank deposits are called deposit currency. This use of the term
currency is of comparatively recent origin, dating from the period
following World War I. Earlier uses of the term were more restricted.
In countries in which the governments did not issue paper money, the
term paper currency was applied exclusively to bank notes. In the U.S.
and a number of other countries, on the contrary, the application of
the term currency was limited to government-issued, legal-tender paper
money. The change from the earlier, restricted meanings of the term to
its modern significance resulted in part from the great increase,
following World War I, in the use of credit instruments. The volume of
currency needed to transact the business of a country is determined,
basically, by the volume of commodities and services in circulation.
Ordinarily, the larger the volume of commodities and services, the
greater the volume of currency needed to circulate them. During
periods of increasing production, the volume of currency tends to
rise; during recessions it may fall. Currency Management. Problems of
currency management have occupied a prominent place in the economic
history of the U.S. At the time the national government was
established in 1789, the amount of metallic money in circulation was
insufficient to meet the needs of the new nation and comprised varying
denominations and values of British, Spanish, French, and Portuguese
coins; the paper currency previously established by the Continental
Congress had become worthless and had ceased to circulate; and the
paper money issued by the states had become depreciated. Early efforts
to establish a sound metallic and paper currency led to the inception
of the First United States Bank (1791); a national currency (1792),
including the present decimal system of coinage; and a mint (1794).
State-chartered banks, however, continued to issue paper money, and a
positive solution of the problem of currency management was impossible
in the absence of a national banking system and uniform banking
practices in the states. This lesson was made emphatically clear to
statesmen and economists by the conditions that resulted from the
refusal of Congress, in 1833, to renew the charter of the Second
United States Bank, successor to the First United States Bank. During
the following three decades, sometimes referred to as the dark decades
of American banking, abuses of sound banking practices multiplied and
assumed scandalous proportions, and speculators and counterfeiters
flourished. A basis for resolving the problem of a sound currency was
achieved when the American Civil War induced the federal government to
raise large sums of money through the issuance of bonds. The National
Currency Act of 1863, later amended and renamed the National Banking
Act, was enacted by Congress to establish a national banking system
and a uniform national currency. Later experience revealed that this
system was not sufficiently elastic in providing adequate amounts of
currency during periods of prosperity and in contracting the volume of
currency in slack times. Federal Reserve System. Efforts to remedy the
defects of the national banking system led to the establishment of the
FEDERAL RESERVE SYSTEM, (q.v.) under the Federal Reserve Act of 1913.
The Federal Reserve, which controls the volume of money and credit in
the U.S., was planned as an equivalent in some respects of the central
banks of other countries. All U.S. currency is now issued by the
Federal Reserve banks; bank notes, previously issued by the national
banks, were retired in 1935. As of Dec. 31, 1974, private citizens
have been allowed to own gold but not to use it as currency.
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