Nowadays, in the world economic market, paper money is the main medium of exchange. Previously, in the ancient era, people used to use metal coins and other mediums of exchange, but now paper currencies are the mainstream medium across the globe. In this article, we will discuss the history of paper currency in America, and we will also discuss how it started. Let's start.
The history of American currency
It is known that the Massachusetts Bay Colony issued paper money in America in 1690, and it was the first time when a western-word government authorized paper money. In China, paper currencies have existed for quite a long time, and the history of paper currencies is older in China and some other Asian countries than in the Western world. America became the first country to issue paper currencies by the government among all western countries. A Military expedition to Canada was financed in 1690 by The Massachusetts Bay Colony, and bills of credit were issued for the purpose.
Later in 1775, it was the Continental Congress, the union of former colonies, that started to protest against the British monarchy. The same colony introduced the national paper currency in America. During that period, the United States was not exactly how it is today. There were 13 colonies that created the United colonies later, and it is the same 13 colonies that created the United States we know today. During that time, foreign coins like the Spanish dollar were in wide circulation in every colony to support war activities. Currency Acts in 1751, 1764, and 1773 were passed by the British Parliament. The main purpose was to regulate colonial paper currencies to eliminate confusion.
It was the time of the American revolutionary war when the colonies became independent states. They were not anymore under the monetary regulations and the acts imposed by the British Parliament. Each of the colonies started to use paper currencies to finance military activities. Paper money was also issued by the Continental Congress during the Revolution period to fund war activities. These currencies were known as Continental currency. Later, the colonial currency was used to fund several wars and manage different situations.
- Pennsylvania Colony. Provincial Promissory note, May 1, 1760 issue, the 50s. (ANS 0000.999.29333)
- Pennsylvania Colony. Provincial Promissory note, May 1, 1760 issue, £5 (100s.) (ANS 0000.999.29334)
- Revolutionary War: Continental Congress. Continental Currency promissory notes, May 10, 1775 issue, $1 (ANS 0000.999.29827)
The paper money issued by the Continental Congress was of no use after the war. Because of the experience Americans gained during this time, Americans were not supporting the use of paper money. During that time, there was a group of people who got engaged in fraudulent activities, and as a result, counterfeit paper money became a common thing. There was extreme depreciation and a lack of redemption. It became extremely important to stabilize the governing funds, and for that purpose, Alexander Hamilton, as the first Secretary of the Treasury, first started to build a bank which was the need of the moment. This financial institution began issuing private currencies to facilitate borrowing and lending.
When the United States adopted the constitution, the government body redefined monetary production as a national prerogative. On the other hand, there was a huge need for a medium of exchange during that period which created the perfect scenario for the growth and development of numerous banks with their own paper currencies. Though the states could not, according to the constitution, use their own currency, the private banks started producing the currencies that were known as broken Bank notes.
This situation failed to avoid the demand for money in the civil war. On the other hand, the government in both North and South began to print their own currencies for wartime. Some of the former note-issuing businesses were converted into National banks under the national banking act of 1863. On the other hand, the bank of the United States, which was officially private, became the first central bank of the country. The bank intended to handle all the government expenses.
The financial panic and American currency notes
Because of different notes issued by different banks and organizations, it created a huge confusion among the citizens. The use of paper notes became famous after the war. There were a variety of different currencies issued during that time, such as interest-bearing notes, notes convertible to gold or silver, notes redeemable in silver or gold, notes usable for paying taxes, etc. There were also legal tender notes that were legally required to be accepted in case of payments. The Federal Reserve Bank also issued a new paper currency to handle the situation that lasted until the 1960s and abandoned all the notes of the time, including legal tender. It was the Federal Bank that introduced different dollar bills in several series in the country that we know as modern American dollars.
American dollars hold a glorious history that has wars, chaos, financial panic, civil war, and many other scenarios. After all of them, American dollars are now leading the economy of the world.