Money (a brief overview)

One concern that’s universal across all nations in all time periods: money. Not just how to collect it and how to spend it, but what it will be, how it’ll look, even what it’s called. The United States has no immunity from this concern; indeed, interest in the properties and presentation of money has had the nation’s attention from its earliest days.

Official of the U.S. Treasury and newly minted currency (image courtesy of the National Archives)

Official of the U.S. Treasury and newly minted currency (image courtesy of the National Archives)

The word “dollar” has its roots in the word “daler” or “thaler” (depending on whether you used Low or High German); its use dates back to the 16th century. The word as we recognize it today came into being in the 18th century, as shorthand for Spanish pieces of eight. Spanish dollars were so widely used, in fact, that they are often cited as the first example of a global currency.  The dollar sign itself – $ – is thought to be “a conventionalized combination of the letters p and s for pesos. As early as 1788, a government clerk used such a mark, and the present symbol came into general use shortly after that time.”@

Under the Articles of Confederation, the national government was unable to take any financial actions without “a majority vote of the United States in congress assembled.”# Wartime inflation caused the Continental currency (“Continentals”) to swiftly become worth less than the paper on which they were printed; to combat this development, states took to printing their own currencies, but they swiftly succumbed to the same fate.

1/3 dollar Continental Currency (image courtesy Wikimedia Commons)

1/3 dollar Continental Currency (image courtesy Wikimedia Commons)

With the ratification of the Constitution soon came the passage of the Coinage Act in 1792 – which “create[d] the U.S. Mint and establishes a federal monetary system, sets denominations for coins, and specifies the value of each coin in gold, silver, or copper”^ – the official term for the United States’ money unit became the dollar: “Dollars or units – each to be of the value of a Spanish milled dollar as the same is now current.”+

The Coinage Act of 1834 changed the amount of gold grains (both pure and standard) used in the eagle coin, revising it downward and lowering its weight, while increasing the amount of silver used in coining money.

The Civil War brought with it a host of challenges, not the least of which was a need for more money to finance the war effort. In order to raise funds without increasing taxes, the Legal Tender Act of 1862 enabled the printing and circulation of the first federal paper currency since the Continentals, United States notes (though they were known as Demand Notes in their first year of production, so called because they were redeemable in hard specie on demand from the Treasury Department. The nickname “greenback” supplanted it a short time later). “The U.S. Government had no facility for the production of paper money in August 1861, so a private firm produced the Demand Notes in sheets of four notes. These sheets were then sent to the Treasury Department, where dozens of clerks signed the notes and scores of female workers cut the sheets and trimmed the notes by hand.”~ The penalty for counterfeiting these notes was a “fine not exceeding five thousand dollars, and by imprisonment and confinement to hard labor not exceeding fifteen years”= (the BLS Inflation Calculator only goes back to 1913, but according to the Inflation Calculator at DaveManuel.com, which uses data from Oregon State’s Political Science department, $5,000 in 1861 money is equivalent to $131,000 today).

$10 demand note (“greenback”) issued 1861 (image courtesy National Numismatic Collection at the Smithsonian Institution)

$10 demand note (“greenback”) issued 1861 (image courtesy National Numismatic Collection at the Smithsonian Institution)

Until the passage of the National Banking Acts of 1863 and 1864, individual states had the ability to print their own local currency. The Act of 1863 created the National Currency Bureau (which eventually became the Bureau of Engraving and Printing), and directed it to oversee “the issue and regulation of a national currency secured by United States bonds.”= The Act also provided for the taxation of local currency at such a rate as to drive it out of existence. In 1864, the federal government took the issuing of bank charters under its authority, providing for a real national banking system.

On April 14, 1865, President Abraham Lincoln directed the creation of the Secret Service, in response to reports of near unimaginable levels of counterfeit currency in circulation. It was commissioned on July 5 under the auspices of the Department of the Treasury (and eventually became part of the Department of Homeland Security in 2003). Today, the Secret Service’s mission statement is: “[T]o safeguard the nation’s financial infrastructure and payment systems to preserve the integrity of the economy, and to protect national leaders, visiting heads of state and government, designated sites and National Special Security Events.”_

America officially adopted the gold standard in the early days of the 20th Century. It was temporarily suspended during World War I, and again during the Great Depression. In 1933, in response to gold hoarding, bank runs, and deflation, President Roosevelt issued a series of executive orders: 6073 (“The Secretary of the Treasury is authorized and empowered under such regulations as he may prescribe to permit any member bank of the Federal Reserve System and any other banking institution organized under the laws of the United States, to perform any or all of their usual banking functions, except as otherwise prohibited.”`), 6102 (“I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations”`), 6111 (“the earmarking for foreign account and the export of gold coin, gold bullion or gold certificates from the United States or any place subject to the jurisdiction thereof ‘are hereby prohibited”`), in concert with several Acts of Congress (among them the Emergency Banking Act, which allowed only banks approved by the Federal Reserve to operate; the Agricultural Adjustment Act of 1933, which raised the value of crops by reducing surplus; and the Gold Reserve Act, which adjusted the price of gold severely upwards and prohibited private ownership of the metal). The phrase “redeemable in gold” was removed from paper money around the same time.

In July of 1944, the Bretton Woods Conference was held in New Hampshire, to regulate monetary policy among the Allied nations after the conclusion of World War II. At the Conference, the International Monetary Fund and what would become the World Bank were established, and the U.S. dollar became the global reserve currency, with a fixed exchange rate of $35 to an ounce of gold. The new system worked well for several years, but its potency declined as other nations recovered and saw their economies grow again. The U.S. saw a rise in inflation, a growing trade imbalance, and a sharp leap in unemployment. To combat all these forces, in addition to a feared run on American gold holdings from the international community, in 1971 President Nixon issued Executive Order 11615, kicking off what is commonly referred to as the “Nixon Shock,” ending the Bretton Woods system and the ability to directly exchange dollars for gold. The era of freely floating currencies began with the Nixon Shock, and continues through this very day.

The paper used for the production of U.S. currency comes from a single company, Crane & Co., which provides the government with paper sheets (when people refer to money “feeling” like money, it’s due to the unique blend of cotton and linen the company uses) that often have security threading woven into them when they arrive.

Since 1914, the one hundred dollar bill has been redesigned five times, with three of those efforts happening since 1990 (the latest version was introduced in October of 2013 -if you’d care to learn more about it, you can visit NewMoney.gov). In order to stay ahead of counterfeiters, the production of the bills, and the images on them, has gotten steadily more complex.

Series 1919 $100 bill

Series 1919 $100 bill

Series 1929 $100 bill – note the “will pay to the bearer on demand” text near the bottom

Series 1929 $100 bill – note the “will pay to the bearer on demand” text near the bottom

Series 1990 $100 bill – included microscopic printing & metallic security strip

Series 1990 $100 bill – included microscopic printing & metallic security strip

Series 1996 $100 bill – including UV security thread & microprinting

Series 1996 $100 bill – including UV security thread & microprinting

Series 2013 $100 bill (front) – blue 3D security ribbon, color changing bell

Series 2013 $100 bill (front) – blue 3D security ribbon, color changing bell

Series 2013 $100 bill (back)

Series 2013 $100 bill (back)

* OED
@ Dictionary of American History
# OurDocuments.gov
^ NewMoney.gov
+ USmint.gov
~ History of the Bureau of Engraving and Printing, from MoneyFactory.gov
= ProQuest Congressional
_ SecretService.gov
` American Presidency Project

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