Greenbacks: A brief history of US currency
We were always about that paper
Even in America’s foggiest, earliest days, folks were using paper money to pay for goods and services. Early colonists didn’t use dollar, pennies, dimes, or quarters. They used what they knew – British money – even though they had very little of it.
However, Spanish and Portuguese explorers and traders had plenty of coinage with them, and these foreign pieces ended up becoming the most commonly used coins in the colonies. Things got even more interesting. Tired of waiting for an influx of English currency, the colonists began adopting the Spanish dollar, a decision that would eventually influence the creation of the United States Dollar. But it wasn’t enough for the growing Colonies.
Too many printers spoil the value
Massachusetts, Pennsylvania, New England, and soon all of the thirteen colonies were printing and distributing their own money. This might have been a grand idea, except that the bills weren’t all worth the same.
This meant that fifty New England pounds might only be worth three Pennsylvania pounds. And things only got worse when the colonies were contracted to contribute funds to England’s wars. Parliament began to grow concerned when colonial money lent to them became worthless overnight due to rapid depreciation. To remedy this situation, they enforced a series of Currency Acts which limited the amount of money printed in the colonies, and what it could be used for.
Not worth a Continental
After declaring their independence from England, the people needed a new form of currency. The Continental Congress was eager to give them one. These paper bills, known as Continentals, flooded the newly formed states.
While they were a great idea, in theory, there were far too many of the made to stem the tide of depreciation. It didn’t help that the British, salty over their defeat in the New World, began to counterfeit Continentals and use them to pay for goods from the United States.
The value of the Continental plummeted. Something had to be done.
In 1787, some of the earliest forms of US Federal Government convened in Philadelphia, determined to solve the money crisis. They decided that states could no longer print their own money, and they also discussed how difficult it was to keep paper money afloat in a world rampant with counterfeits.
A keen interest in coinage
By 1792, the Americans realized that they needed a more permanent solution to their currency issues. The birth of the United States Mint heralded huge changes for the people and their purses.
The United States Dollar was born with the successful implementation of the Coinage Act of 1792. Established as the primary currency of the new nation, the first dollars were actually coins. They would continue to compete with the Spanish dollar for dominance until 1857.
The first US coins were minted using a combination of silver and other metals. The value of this money was based on the amount of silver that the fledgling US Treasury had in its possession. And while this system worked reasonably well for a while, the discovery of a massive silver trove in the western territories caused the value of silver to drop significantly, necessitating a new form of banking.
Greenbacks and the gold standard
Basing the US currency on the gold standard, rather than the silver standard, allowed the young nation to enter into international financial endeavors. This standard would hold true until 1933. But the emergence of the paper dollar, as we know it today, is all thanks to the Civil War. These green, black, and white paper notes weren’t backed by gold or silver. Their value came from trust in the government.
After the Civil War ended, more United States Notes entered circulation. These ‘greenbacks’ would come to dominate the currency system, eventually transforming into the Federal Reserve Note used today.
While the usage of paper money has declined with the invention of online banking and digital transactions, the US Dollar is still a globally recognized symbol of wealth.
A deeper dive — Related reading from the 101:
- September 3, 1777: The American flag is first raised | History 101
The day that the famous Stars and Stripes finally got to fly.
- May 13, 1607: English colonists arrive in Jamestown| History 101
A brief look into the lives of America’s first English inhabitants.