The Other Coin: Paper Money
Paper money or banknotes is a collecting area of increasing popularity as the vividness
of designs and variety of topics has grown. After all you can put anything on a piece
of paper. Paper money has been reluctantly accepted as currency since the money has
no intrinsic value and is often considered fiat money, contributing to inflation.
Germany, Russia, Turkey, and recently
Yugoslavia and several African nations have
had to issue notes in the hundreds of billions of the local dollars as inflation ravished
their countries. Run away inflation is largely from failed attempts to impose socialism
through expropriating other people’s wealth, which quickly runs out.
The first paper banknotes appeared in China about 806 AD for letters of credit
transferred over large distances. The first real use of a paper money system was for
about 300 years of a 400 year period between 1050 and 1450 when the Mongols ruled
China. Marco Polo noted its use. The Bank of England began issuing notes in 1694,
following the practice of goldsmiths and local banks, who issued letters of credit
backed by gold or silver. Paper currency was adopted throughout Europe and the US
in the 17th century. In desperation and needing to fund the new war with the French
Colonies in Canada, an impoverished England first authorized the Massachusetts Bay
Colony to print bills of credit in 1690. Gradually in pre-Revolutionary America, each
colony began to print its own form of currency. The first was issued by Rhode Island
in 1710 with the other Colonies following suit up to the Revolutionary War.
To finance the American Revolution, and because the Colonies were powerless to tax,
the Continental Congress authorized the first actual American Currency on May 10,
1775.Not having bullion backing and easily counterfeited, Continental notes were
worth only 2 1/2 cents to the dollar by 1780. Thus began the phrase, not worth a
Continental. By 1836, banks in the United States had swollen to over 1,600 in number.
With scant regulation, these state-charted, private banks ran wild issuing over 10,000
different varieties of banknotes. When the banks failed, the paper money became
worthless and was called obsolete bank notes. The banknotes often traded at a fraction
of their face value, making coins the preferred currency.
During the Civil War, both the North as well as the South developed their own
currency. Ripped apart by war and teetering on bankruptcy, Congress ordered the
printing of a number of notes. These notes were commonly called horse blankets
because of their large size. Fractional notes from 3 cents on up were also issued by the
Federal government. In 1863 there still was a problem in stabilizing the value of our
currency. Since over 75 percent of all bank deposits were held by nationally charted
banks, national banknotes backed by U.S. government securities came into being. This
lasted until 1928. To create greater confidence in our currency, gold certificates were
issued against U.S. gold holdings by the Department of the Treasury from 1865 until
1922. Beginning in 1878 and continuing through seven series, Large Size Silver
Certificates stayed in circulation until 1923 with the smaller size remaining until this
day. The Government stopped redeeming them for silver bullion on June 24, 1968.
Starting with the reduction in currency size in 1929, the US Government has minted
over 1,200 issues of currency - Legal Tender Notes; Silver Certificates; National Bank
Notes; Federal Reserve Notes; World War II Emergency Notes; Gold Certificates; and
Military Payment Certificates. Many of these varieties are being printed yet today. In
1990 a new series of notes was introduced to improve security and stay ahead of
counterfeiters and advances in technology which make it easier to reproduce currency.
These notes include microprinting and an embedded security strip. There’s a nice
collection of US currency on the web by the Federal Reserve in San Francisco at http:
//www.frbsf.org/currency/index.html Meanwhile, foreign countries made notes out of
plastic or paper and polymer mixes with watermarks, microprinting, new textures,
foils, and more vivid colors trying to keep a step ahead of the counterfeiters. Collecting
foreign banknotes is a fun and cheap way to get involved in currency collecting. I have
added Russian Civil War notes to my Russian coin collecting and try to get notes from
WWII and the Iron curtain with a note representing the free, occupied, and liberated
country. Many Greek and Cyprus notes have ancient coins or archeological sites on
them.

Numismatically yours, David Elliott