The world might run on money, but somehow the United States got by without a standardized currency system for almost 100 years. Until 1861, private banks (ultimately about 7000 of them!) circulated their own paper money with different designs. People were often charged exchange rates when spending or redeeming their respective notes, much the same way money is exchanged in different countries today. Banks and businesses didn’t even have to accept privately printed money, so no one knew for sure whether their money would function in exchange for goods and services. As you can imagine, this was a bit of a disaster.
The printing of “Demand Notes” in 1861 marked the U.S. government’s first serious foray into paper currency. They served as a way to pay for expenses related to the Civil War, and the notes were basically government IOUs. They were called Demand Notes because they were payable “on demand,” and also developed the nickname of “greenbacks” because of the color ink used to print the backs. Printed by a private company, Demand Notes were sent to the Treasury in sheets. Clerks and laborers then signed, separated, and trimmed them by hand before sending them out into circulation. The notes didn’t have a Treasury Seal, and weren’t signed by the actual Treasury officials listed.
In 1862, “United States Notes” became the government’s first large-scale issuance of paper currency, though the bills were still printed by private companies and then sent to the Bureau of Engraving and Printing to be finished. In 1869, the Bureau took over the printing of United States Notes and the currency was prominent well into the 20th century.
Graphic by Chloe Effron
Beginning in 1863, private banks could be chartered as “National Banks” by the government and themselves print standardized currency. Up until 1929, the government allowed banks to issue their own notes under the National Banks Acts of 1863 and 1864. The “national bank notes” were produced on paper authorized by the government and had the same basic design.
The Federal Reserve was finally established in 1913, and the government began to issue Federal Reserve Notes (that’s the official term for U.S. money if you ever want to flex your currency knowledge). Both Demand and United States Notes were still redeemable in gold until 1933, when the United States left the gold standard behind. United States Notes were eventually discontinued and none have been placed into circulation since 1971.