Overview/History

World History

A World History of Paper Currency

A Beginning in Asia

Paper money first appeared in Asia long before the Western world. This fact should not be surprising considering paper was invented in China in the 2nd Century AD, approximately 1,000 years before it arrived in Europe.

Called flying money, paper notes first appeared in the Chinese province of Sichuan during the reign of Emperor Hsien Tsung. They represented a deposit of iron coins and were issued by important families and had no official state authorization. The notes became so popular that the government eventually stood behind these notes and issued a law punishing counterfeiters with death. None are known to exist today.

Eventually, under the Sung Dynasty, the government issued its own paper money, called convenient money. Its management was held in the capital Ch'angan. These notes had their own denomination system and were convertible every three years. They later experienced a currency feature very common today: inflation.

World History

A World History of Paper Currency

The First Western Forms of Paper Money

All early forms of paper currency in the Western Hemisphere occurred during times of war or other emergency situations.

The first instance of paper money in Europe occurred in Spain in 1438. During a Moor invasion, a Spanish military leader issued some paper money to soldiers that circulated all over his city. No known notes have survived.

In 1574, the Dutch city of Leyden issued cardboard coins minted from the cover or prayer books while Holland was trying to regain its independence from the invading Spanish. The Italian city of Candia later issued its only paper money complete with different denominations. It was issued to citizens after the city's Superintendent recalled all gold and silver. After a shipment of coins arrived from Venice, all notes were fully reimbursed.

World History

A World History of Paper Currency

Early European Banknotes

Sweden is home of the first European banknotes. Its copper Taller coins were very large and suffered from changing world prices for the metal in 1660. To cope with the problem, Johan Palmstruch's bank in Stockholm issued hand-written notes with set denominations, issuing date, and pressed stamps the following year. Later issues were made with a press; only the signatures remained hand-written.

Palmstruch's notes became very popular and widely used in Sweden. They were easily transferable, could be used by anyone, and were payable on sight, making them much easier to use and superior to the available forms of credit at the time. Unfortunately for Palmstruch, he had never consulted the King.

Rumors circulated that coins were not available for reimbursement and the monarchy ordered the notes to be devalued. Eventually, Palmstruch's bank was closed and he was imprisoned. In 1668, the government recalled all circulating notes and issued its own official currency, which did not share many of the best properties of Palmstruch's notes.

By the 1680's, the use of paper money began to take place in other European countries and the New World. Canada (still a French colony) circulated notes on playing cards. Other colonies soon developed their own paper notes.

Right before the turn of the 18th Century, a few nations established national banks, including the Banks of England and Scotland. Scotland began printing pounds right away, a few years before England's bank began issuing banknotes in 1807.

Norway also circulated notes at this time, called Rixdaler. Jorgen thor Mohlen received permission from the ruling state of Denmark to print these notes on watermarked paper. Much like Sweden, rumors of insufficient backing spread and Mohlen soon died in misery.

World History

A World History of Paper Currency

John Law - Currency Champion

There was no one, perhaps, as key to the widespread use of paper currency in the Western Hemisphere as John Law. The son of a wealthy goldsmith, Law earned the title of Earl of Lauriston at the age of twelve.

Law studied finance and traversed Europe throughout his twenties, having written several works about paper currency, including Memory to Prove that a New Type of Money Can be Better than Gold and Silver.

Law first garnered interest from Vittorio Amedeo III, an Italian duke in Turin, to issue paper money in 1712. After the Duke was appointed King of Sicily, however, the project was dropped.

Law then moved to France, taking 1.5 million Livres with him. At the time, the French Treasury only held 700,000 Livres and had a deficit of 78 million Livres. Wanting to avoid becoming the first European state to ever declare bankruptcy, the government took a chance with Law. Using his own expenses, Law opened the Banque Generale on June 5th, 1715.

Both the bank and the currency enjoyed wild success as the French economy turned around completely by 1718. In this year, the state took over operations and turned Law's bank into the Banque Royale. The government spent foolishly and recklessly while Law was pacified with gifts, honors, and titles.

Soon the government's lavish spending caught up with it and disaster hit the country. Law left the country, but worked from abroad to repair the economic climate. He even refused the large bags of gold coins - the true, safe money of the time - offered by Philip of Orleans. Law again turned France's economy back around, but he was repaid by the ruling party with only slander and mudslinging.

World History

A World History of Paper Currency

A Final Word

Paper currency would soon reach most nations in some form or another, but it always met with difficulty. Like Palmstruch, Mohlen, and Law, many paper money trailblazers often faced incredible hardships, but without their contributions, people's pockets would be much heavier today.

World History

A World History of Paper Currency

About Paper Currency

According to the International Bank Note Society (IBNS), there are two basic requirements for paper money: fixed denomination and payment to the holder. IBNS also say that payment on sight would be another requirement today although not for many past issues of currency. Certain emergency-issued pieces of papers would not have passed this last requirement, but nonetheless functioned as paper currency.

For any currency to be valid and function in a society, it must hold the trust of the people. The person receiving the note must trust the issuer, or else the note will not be accepted. As IBNS states, "Paper money circulation is, was, and has always been, a circulation of trust."

According to the International Bank Note Society (IBNS), there are two basic requirements for paper money: fixed denomination and payment to the holder. IBNS also say that payment on sight would be another requirement today although not for many past issues of currency. Certain emergency-issued pieces of papers would not have passed this last requirement, but nonetheless functioned as paper currency.

For any currency to be valid and function in a society, it must hold the trust of the people. The person receiving the note must trust the issuer, or else the note will not be accepted. As IBNS states, "Paper money circulation is, was, and has always been, a circulation of trust."

U.S. History

A History of United States Paper Money

U.S. History

A History of United States Paper Money Paper currency has a long and storied history in the United States. In early colonial days, coinage was in short supply. Many of the thirteen original colonies issued paper money while still under British rule. One of the first issuers was the Massachusetts Bay Colony, whose pressing dates back as far as 1690. On most occasions, paper currency was issued in order to fund troops for military efforts.

The Continental Congress also flirted with using paper as money to finance the war. They authorized the use of Continental Currency in 1775, but the experiment failed as printing costs soon exceeded the face value of the notes. It would be another 60 years before anyone else in our country would try again.

In 1836, hundreds of different banks operating under their state's charters were authorized to issue paper currency. In all, about 1,600 of these privately owned banks issued currency, resulting in over 30,000 variations in design. Confusion reigned and the money was only as good as the issuer’s reputation. The situation deteriorated.

By the Civil War, the government imposed a 10% surcharge on each of these notes in circulation. This surcharge effectively forced the issuer to gather in all the notes for redemption, or be forced out of business. Most opted for the latter and any outstanding notes were never honored.

The birthday of actual United States paper currency dates is July 17, 1861. A Congressional Act on this date allowed the Treasury Department to print and circulate money as an act of emergency for the Civil War effort. Interestingly, all American currency from this date forward remains legal tender.

The first notes were Demand Notes. Although it is generally believed that they were issued only with the faith of the government backing them, they were actually redeemable in coin. This little known fact was instrumental in maintaining the public’s faith in paper money even as a critical shortage of coinage occurred due to massive hoarding during the war years. These notes were printed on both sides with the back inked entirely in green, earning them the name “Greenbacks.” The name was to become synonymous with U.S. currency and is still used today.

With the appearance of United States Notes, or Legal Tender Notes, in 1862, the greenback design continued. These notes differed from the original-issue Demand Notes in that the legal obligation of the government was printed on the back. These notes, backed only by the good faith and credit of the United States government, were deemed legal tender by law, essentially forcing everyone to take them as payment for “all debts, public and private except duties on imports and interest on the public debt.”

The federal government began the practice of backing some of its paper currency with gold just three years later in 1865, giving its citizens more confidence in paper. These Gold Certificates remained in circulation until the Gold Reserve Act was issued by President Franklin D. Roosevelt in 1933. The only occurrence of paper currency confiscation by the United States government, citizens had to turn in all Gold Certificates in exchange for other types of paper currency.

Eventually, the United States government regulated paper currency to an even higher degree. The Federal Reserve System assumed the role of our nation's central bank in 1913 and today its notes are the only type of currency issued.

Historically speaking, the widespread acceptance of paper money by the American people is a relatively recent phenomenon. By the end of the 19th Century, paper money was very much a part of the American economy since much of it was redeemable for gold or silver coin on demand. Paper currency became such a regular part of American commerce that by 1963, the government was able to remove all redemption demands with little or no protest from the public.

U.S. History

A History of United States Paper Money

Types of U.S. Notes
Descriptions of Various Types of United States Paper Currency

There have been many different types of currency recognized by the United States (or parts within) since its inception. Some discontinued forms include Fractional Currency, Confederate Currency, and Military Payment Certificates. U.S. currency is often referred to as either Large or Small Sized Currency.

Large Sized Currency

More than a dozen different types of Large Sized Currency (7 3/8 " by 3 1/4") have circulated in the United States since the beginning of the 19th Century. Some of these include War of 1812 Treasury Notes, Compound Interest Treasury Notes, and Refunding Certificates. A brief description of two important types of Large Sized notes follows.

Demand Notes (1861)

Coming in $5, $10, and $20 denominations, Demand Notes were one of the earliest forms of currency issued by the United States government. These notes were unique at the time in that they had printing on their back - in green ink. Hence, they earned the nickname "Greenbacks".

U.S. History

A History of United States Paper Money

National Bank Notes (1863-1935)

These notes were printed by the federal government, but issued by banks with national charters and backed by securities held at the U.S. Treasury.

Small Sized Currency

The United States began issuing currency that was about 25% smaller than the Large Sized Currency it had been issuing. All notes in this series contain dimensions of 6 1/8 " wide by 2 5/8" tall. All six types of Small Sized Currency (listed below) had larger versions that preceded them.

Legal Tender/United States Notes (1862-1966)

The longest running types of currency, these notes were dated from 1862-1923 in the Large Sized variety and 1928-1966 in the Small Size variety. Backed only by the good word of the government, these notes were a fiat currency. These notes ranged in denomination from $1 to $1000.

U.S. History

A History of United States Paper Money

National Currency (1863-1929)

Bearing the words "National Currency" at the top of the note in the center, these notes were issued by those banks that received a charter from the United States. The government was hardly selective; over 14,000 banks issued this type of currency.

Gold Certificates (1865-1934)

This currency was backed by and redeemable in gold coin. Gold Certificates ranged in denomination from $10 to $10,000. Owning gold certificates became illegal in 1933. When Franklin Delano Roosevelt issued an executive order requiring citizens to turn in all gold coin, gold bullion, and gold certificates. Interestingly, these certificates were printed the year after Congress passed this act, although they were never circulated.

Silver Certificates (1878-1963)

As with Gold Certificates, their silver counterparts were issued in both Large and Small Size currency. They were redeemable for silver coins being reserved in the Treasury for these certificates. Until 1964, they could still be redeemed for silver dollars and for silver bullion until 1968.

U.S. History

A History of United States Paper Money

Federal Reserve Bank Notes (1913-1933)

Very similar to National Bank Notes, these notes were issued and backed by the Federal Reserve Bank. The smaller versions of these notes were issued in 1933 (although dated Series of 1929) and were printed on paper that had already been partially printed for National Bank Notes.

Federal Reserve Notes (1913-Present)

This is the same money you carry in your wallet today and the only kind that is currently issued by the federal government. Each note bears a letter corresponding to the Federal Reserve Bank that issued it ( “A” for Boston, “F” for Atlanta, “I” for Minneapolis, etc.)

Background

Adding to eye appeal and difficulty to duplicate, the colored background of a note serves a dual purpose.

U.S. History

A History of United States Paper Money

Denomination

Whether in dollars, pesos, or yen, the denomination of the note determines whether one can receive a steak dinner or a hamburger (or maybe not even a soda these days).

Issue Date

In most countries, the date of issue usually includes the day and month. In the United States, however, it only features the year of the last major design change. We know this by the signatures on the note and the dates those persons held office.

Issuing Authority

The Issuing Authority is the department or business that issues the currency. Today in the United States it is the Federal Reserve although that agency did not exist in the 19th Century. The United States government served as the Issuing Authority for the notes of the Atlantic Collection.

U.S. History

A History of United States Paper Money

Portrait

Often nations feature their political leaders or royal dignitaries on their currency. Andrew Jackson is featured on our $20 bills today.

Serial Number

Perhaps the oldest security feature of paper currency, this set of numbers allows close tracking of bills.

Signatures

The signatures of persons in position of authority legitimize currency. In times of yore, paper notes did not achieve legal tender status after printing until they were signed individually.

U.S. History

A History of United States Paper Money

Recent Fraud Protection Innovations in Currency

Color Shifting Ink

A recent innovation in the currency world, the ink in some notes shifts color depending on the angle from which it is viewed. First issued in the United States in larger denominations in the 1990s, the denomination numerals in the lower-right corner on the obverse change from copper to green when the note is tilted.

Holograms

Recently, some countries have included a hologram on some of their currency, creating a beautiful bill that cannot easily be forged.

Microprint

Very tiny print adorns all legal tender paper notes in the United States today. Barely distinguishable with the naked eye, magnification is required to read letters printed into our designs.

U.S. History

A History of United States Paper Money

Threads

Today, some paper bills have either a larger metallic, or smaller colored threads woven into the paper.

Ultra-Violet (UV) Ink

In an effort to foil counterfeiting, UV ink is printed over an area already featuring standard printing. This ink is only visible in special lighting.

Watermark

This security device is meant to discourage counterfeiters. Placed onto the paper before printing, watermarks appear in blank spots on the bill and are visible when held up to the light.

Interesting Facts about U.S. Currency

The Treasury Seal has appeared on every single piece of American currency since 1862. Although it is featured in several different forms and colors, the seal contains the Scales of Justice and a key representing authority. Thirteen stars (one for each of the original colonies) separate the two. The signatures of two Treasury officials adorn each legal tender design in American paper currency history, with the exception of the first two fractional (less than $1) designs.

Indian History

A History of Indian Paper Money

Early Issues

Paper Money, as we know it today, was introduced in India in the late Eighteenth Century. This was a period of intense political turmoil and uncertainty in the wake of the collapse of the Mughal Empire and the advent of the colonial powers. The changed power structure, the upheavals, wars, and colonial inroads led to the eclipse of indigenous bankers, as large finance in India moved from their hands to Agency Houses who enjoyed state patronage. Many agency houses established banks.

Among the early issuers, the General Bank of Bengal and Bahar (1773-75) was a state sponsored institution set up in participation with local expertise. Its notes enjoyed government patronage. Though successful and profitable, the bank was officially wound up and was short lived. The Bank of Hindustan (1770-1832) was set up by the agency house of Alexander and Company was particularly successful. It survived three panic runs on it. The Bank of Hindustan finally went under when its parent firm M/s Alexander and Co. failed in the commercial crisis of 1832. Official patronage and the acceptance of notes in the payment of revenue was a very important factor in determining the circulation of bank notes. Wide use of bank notes, however, came with the note issues of the semi-government Presidency Banks, notably the Bank of Bengal which was established in 1806 as the Bank of Calcutta with a capital of 50 lakh sicca rupees. These banks were established by Government Charters and had an intimate relationship with the Government. The charter granted to these banks accorded them the privilege of issuing notes for circulation within their circles.

Notes issued by the Bank of Bengal can broadly be categorized in 3 broad series viz: the 'Unifaced' Series, the 'Commerce' Series and the 'Britannia' Series. The early notes of the Bank of Bengal were unifaced and were issued as one gold mohur (sixteen sicca rupees in Calcutta) and in denominations deemed convenient in the early 19th Century, viz., Rs. 100, Rs. 250, Rs. 500, etc.

Indian History

A History of Indian Paper Money

Unifaced Notes of the Bank of Bengal

The Bank of Bengal notes later introduced a vignette represented an allegorical female figure personifying 'Commerce' sitting by the quay. The notes were printed on both sides. On the obverse the name of the bank and the denominations were printed in three scripts, viz., Urdu, Bengali and Nagri. On the reverse of such notes was printed a cartouche with ornamentation carrying the name of the Bank. Around the mid nineteenth century, the motif 'Commerce' was replaced by 'Britannia'. The note had intricate patterns and multiple colors to deter forgeries.

Britannia Series

The second Presidency Bank was established in 1840 in Bombay, which had developed as major commercial centre. The Bank had a checkered history. The crisis resulting from the end of the speculative cotton boom led to the liquidation of Bank of Bombay in 1868. It was however reconstituted in the same year. Notes issued by the Bank of Bombay carried the vignettes of the Town Hall and others the statues of Mountstuart Elphinstone and John Malcolm.

Indian History

A History of Indian Paper Money

Notes of the Early Private & Semi-Governmental Banks

Banking in India owes it ’s origins in the remote past. Buddhist religious texts dating back to 500 BC indicate that Banking existed as a commercial activity among the tradesmen of the time. However, relevant to the context of Bank Notes, Banking in India started as an activity among the European traders, chiefly the East India Company in the early 18th century. Private Banks were set up in the province of Bengal. The idea of paper currency was not new to the European traders as it was already in existence in their own countries. The first bank to employ the concept of paper money was a bank set up in Calcutta by Governor Warren Hastings in c. 1770 AD. However, no issues of this bank survive.

The next bank to issue notes and circulate them on a wider basis was the Bank of Bengal. It was the first bank in India having a government share in its working capital. Consequently, its notes were accepted to a certain extent in payment of government dues. The earliest known note of this bank bears the date of September 9, 1812. The notes of this bank were later printed by Perkins, Heath & Co. in England. They can be distinguished into at least 10 different types. They were issued in a wide range of denominations, from Rs. 10 to Rs. 1000. The notes depict the personified figure of "Commerce" sitting on articles of merchandise. In 1858, following instances of forgeries, the designs of the notes was completely changed. The new design showed "Britannia" seated in the centre, flanked by "Commerce", "Trade" and "Agriculture". The small vignettes on the sides represent constituent provinces of the Bengal Presidency. These include the Hooghly river scene, the Assamese Rhino, the tomb of Sher Shah in Bihar and the Palms of Orissa Coast.

Indian History

A History of Indian Paper Money

Later in the 19th century, the city of Bombay witnessed a commercial boom. It led to the establishment of the Bank of Bombay, which received the charter in 1840. Like the Bank of Bengal, the bank of Bombay also had a government share in its capital. The charter empowered the bank to issue its own notes. These notes bear the vignette of the Town Hall of Bombay, the centre of commercial activity which took place in an open space just in front of this majestic building. The notes also show statuettes of the Hon. Mount Stuart Elphinstone and Sir. John Malcom, the first Governors of Bombay Presidency. The notes of Bank of Bombay range in value from Rs. 10 to Rs. 10,000. Most of the used notes have their signature portion cut after encashment.

The last presidency bank to come into existence was the Bank of Madras. It was established in 1842. Unlike the other two banks, notes of the Bank of Madras were not approved by the government of Madras Presidency for payment of government dues. This let to a severe curtailment in their circulation. They are the rarest of all presidency bank notes. They show a statue of Sir Thomas Munroe, the first governor of Madras, and range in denomination form Rs. 10 to Rs, 3,000.

Apart from the three banks mentioned above, which enjoyed government support, there were several private banks which issued their own notes in this period. However, their circulation was extremely limited and most of such notes in existence today are specimens or unissued notes. These banks include The Bank of Hindustan, The Union Bank, The Commercial Bank and the Calcutta Bank in Bengal; The bank of Western India, The Oriental Bank and the Commercial Bank of India in Bombay; The Madras Government bank and the Asiatic Bank in Madras.

Indian History

A History of Indian Paper Money

Government of India" Notes
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The idea of issuing paper currency by the Government was promulgated by Sir James Wilson, the Finance Member in the Executive Council of the Viceroy, in 1859. It was adopted by his successor Samuel Laving in 1861, with substantial changes which ultimately made the issue of currency notes quite rigid in its structure. Accordingly, an act was passed in 1861, empowering the Government of India to issue currency notes. It also provided for establishing the necessary bureaucratic setup for effective functioning of the issue, circulation and encashment of the notes.

By the provisions of this act, certain "circles" were established for the issue of notes. These circles had sub-circles under them. The post of Circle- Commissioner was created to supervise the issue of notes within the circle; and the Supreme Commissioner of Issue, reporting to the Finance Member, was to be responsible for the issue of notes in general. The number of these circles varied over the successive years. Initially, the notes issued in a particular circle were not circulated in another circle, and their encashment was possible only at that circle or a sub-circle office under it.

The first notes issued under the act of 1861 bear the portrait of Queen Victoria in the top left corner. The notes were printed in England on a watermarked paper. The watermark incorporated signatures of Lord Canning, The Viceroy and Samuel Laving, the Finance Member. The known notes are issued by the circle of Calcutta (with sub-circles at Allahabad, Lahore and Nagpur), Bombay and Madras. These notes are extremely rare. Their denominations range as 10 Rupees, 20 Rupees, 50 Rupees, 100 Rupees, 500 Rupees and 1,000 Rupees. They bear the signature of the Commissioner of issue. The notes issued at a sub-circle also have an endorsement by the subordinate commissioner.

Indian History

A History of Indian Paper Money

The simple form of these notes led to instances in which forgeries were reported. Soon afterwards, the government decided to change the design substantially, incorporating better security features such as a green under print denoting the denomination for the promise text, use of guilloche designs and alterations in the quality of the paper and the watermark. The watermark now incorporated a code which denoted the date of manufacture of the paper. The system of issue through circles and sub-circles was not changed. In fact, many more sub-circles were established. They were:

Circle	Sub-Circle
Bombay Calcutta Madras Rangoon	Akola, Karachi Lahore Allahabad Cawnpur Vizagapatam Coconada Trichinopoly

These revised notes are known in denominations of 5, 10, 20, 50, 100, 500, 1000 & 10000. In the early 20th century, it was realized that paper currency was getting more and more popular. It was therefore desired that the rigidity afforded to the issue of notes be minimized. As a measure towards this end, notes were "universalized", i.e. the restriction on their encashment at the original circle of issue was removed. This was done in a gradual manner; the low denominations were universalized first, whereas the higher denominations of 100 and upwards were universalized much later. However, the names of the issuing circles were retained in these notes, in full or as initials. In about 1903, a new design with a red under print was employed for the notes of 5, 10 and 50 Rupees.