The year is 1930. Look out, Shipwreck Kelly – people are dancing the Charleston atop flagpoles everywhere!
The Philadelphia Athletics are charging toward the World Series behind the big bat of Jimmie Foxx! The Great Depression enters its sixth and most likely final month! The nation is roiled in hysterics at the antics of Krazy Kat!
Some of that probably isn't true, but I really want to take you on a historical journey and the proper setting is important. Though none of us were alive in that year, some of you are old enough to remember that what I'm about to tell you is 100% true: in 1930, there were six different kinds of paper currency in use in the United States. Not six different denominations; six different kinds of money. By the end of the Depression only three remained as the Federal government moved aggressively to gain more control over the money supply (and its supply of precious metals, as we'll see). Today there is only one. Nonetheless, any of these can still be used as legal tender although the collectible value of most examples would far outweigh its nominal value.
A bit of background. In 1928 the U.S. fully abandoned what collectors and historians uncreatively call "large size" currency. Throughout the 19th Century and beginning of the 20th, paper money varied widely in side. Most of it was much larger than what we use today. The large size adopted in 1914 was approximately 3" x 7.
5". The "small size" adopted in 1928 – the familiar size we use today – was simply a practical choice; the government wanted to standardize currency while saving money on paper with a smaller bill.
In no particular order, the six types of currency were:
1. United States Notes, the original "Greenback" and the first permanent paper money issued by the Federal government. US Notes are/were currency issued directly by the government (in contrast to today's currency, which is issued by the Federal Reserve at the behest of Congress) and was authorized by the Legal Tender Act of 1862 as a means of meeting government obligations during the Civil War. They were intended to be recalled and destroyed at the end of the War, but farmers and borrowers liked the inflationary effect of having more paper money in circulation (a political issue that presaged the Free Silver movement). US Notes are readily identifiable by their red seal and serial number, as well as their unique statement of value called the Second Obligation: "This Note is Legal Tender for All Debts Public and Private Except Duties On Imports And Interest On The Public Debt; And Is Redeemable In Payment Of All Loans Made To The United States."
US Notes disappeared when the government stopped redeeming currency for gold and then silver in 1965. Since there was no longer any practical difference between the US Note and Federal Reserve Note, the former was discontinued.
2. Silver certificates, as the name implies, were convertible directly to silver dollar coins (or later, silver bullion in any form) until such redemption was halted in 1964 by the Treasury Department due to the rapid increase in the price of silver. Despite being convertible for precious metal, in practice SC's were used as ordinary currency alongside the other non-redeemable bills. They're easily distinguished by the bright blue seals (and note the "Original Obligation" on the left):
3. Gold certificates are…well, you can figure it out. Their production and convertibility to precious metal was halted much earlier, however, in 1933 when FDR made the private ownership of gold illegal by Executive Order. Interestingly, these bills became illegal to own at that point, and a final series printed in 1934 was used solely by banks to settle accounts (the 1934 gold certificates are the series with the largest U.S. currency denominations ever printed, including the $100,000 bill featuring Woodrow Wilson). In 1964 GC's became legal for collectors to own but could not be converted to gold. The bright gold seals and serials tend to give these bills away:
4. Federal Reserve Notes are what we use today. They are "fiat" money, not convertible for nor backed by precious metal. They are backed by securities held by the Federal Reserve banks that issue them, and their value is based on the faith and credit of the United States. So be sure not to raise the debt ceiling so that collapses! You know what these look like, with the familiar green seals (although they've certainly gotten more colorful recently).
5. National Bank Notes were issued by specific banks chartered by the U.S. government. They were backed by bonds. The bank would deposit a certain amount of bonds with the Treasury and then could issue National Bank Notes up to 90% of the value of the bonds. They have brown seals and, interestingly, were occasionally signed by hand by the president of the relevant bank. All currency bears signatures but it is usually simply printed on the paper. These were signed with ink pens in some cases. The other obvious design feature is the name of the specific (and sometimes quite obscure) banks that issued them. This example is from the mighty "National Bank of Selins Grove, Pennsylvania."
Note the text indicating that the bill is "secured with United States bonds held with the Treasury." Examples of these bills from particularly obscure banks or with rare signatures are extremely valuable today.
6. Finally, Federal Reserve Bank Notes operated on a similar principle to National Bank Notes, but they were issued by one of the 12 branches of the Federal Reserve bank (the name of which is printed on the bill). These were created as an emergency issue in 1934 when it became apparent that National Banks were hoarding cash, strangling the supply of money in circulation. So the Fed branches deposited bonds with the Treasury and issued nearly identical currency.
Interestingly, they used the same design but Federal Reserve Banks do not have "presidents" like National Banks, so a black bar was inked over the line for the bank president's signature (visible here in the lower right).
Unsurprisingly, the FRBN was eventually seen as an unnecessary redundancy on the Federal Reserve Note. The only difference, technically speaking, is that FRNs are backed by the entire Federal Reserve system whereas FRBNs are backed by a specific branch. No one cared.
If you ever win money for knowing any of this in trivia or on a game show, I get 10% off the top. That's before taxes. Don't make me come looking for you, either.
While I have the feeling that no one actually cares about any of this, I need to create this imaginary incentive to reward myself for having typed this all out anyway.
LK says:
Where's the rest of it?
I was expecting a scathing, thorough critique of our banking and money systems (a-la http://www.moneyasdebt.net/), and all we got was a few pictures of obscure bills none of us will ever see (let alone handle). I demand a follow-up post with revolutionary mantras! And expletives! And pictures of politicians and FOX News commentators with derogatory captions!
Dr. Mac says:
Me too. And how 'bout them Masons?
Xynzee says:
And Obama's gunna take our gunz!!! Or sumptin'!!
I was wondering how you were going to keep this NPF.
So does this mean Monday will be on the gold standard lunacy or related?
c u n d gulag says:
Imagine that – a professor who is also a blogger, writin' a post for no other reason than to edumacate his readers!
Very interesting, Ed.
Which is saying something – because if someone had told me ahead of time what this post was about, I'd have probably said, "Nah, I think I'll skip that one, thanks."
If I ever get on Jeopardy or Millionaire, and this comes up and I answer correctly, I'll tithe you your 10% – of THAT question – not my total take-home. :-)
John Danley says:
Your reward shall be in cashier checks.
Misterben says:
I had no idea. Thank you.
nyncboy says:
Excellent!
Nan says:
I've got a stack of $1 silver certificates in a safety deposit box. They might be collectible, but there must still be a lot of them floating around. From what I've read their collectible value and their value if used as currency are about the same.
Shane says:
I thought it was interesting that one of the things Obama said when discussing Jack Lew as the nomination for Sec of Tres was that he would have to work on his signature since it would appear on currency. They specifically referenced the top of a hostess cupcake in describing it.
JohnR says:
Thanks, Ed! I've had a 'red-seal' note for years, and found a 'blue-seal' one in my change just a few years back, but have never seen any of the others. Most interesting. Reminds me of my youth, when Morgan dollars and shield nickels and other interesting coins still popped up in change from time to time along with the more common silver and "steel" coinage. Every unusual thing leads down a nifty side street.
Nick-B says:
I find it amusing that there isn't a picture of a modern FRN, while there are of every other one. Was it a laziness choice ("Eh, everyone can look at their wallet) or was it based on a stupid government law preventing the posting of realistic (as in REAL) images of current currency?
chautauqua says:
More interesting trivia: With normal daily use, the average lifespan of paper currency by denomination:
$1 … 21 months
$5 … 16 months
$10 … 18 months
$20 … 24 months
$50 … 55 months
$100 … 89 months
JohnR says:
Speaking of Chautauqua (and what a time that was, eh?), at the risk of treading over a line in the sand onto thin ice, here's a currency-tracking link that some among you all might find both useful and unfamiliar:
http://www.wheresgeorge.com/
obligatory revelation: I am not connected with these folks in any way other than that I've so far had three of their bills pass through my hands.
Bitter Scribe says:
Dating myself: I have a vague memory, as a child, as seeing a dollar bill labeled "Silver Certificate" and thinking "What the hell?" Thanks for this—it really was interesting, to me at least.
Pincher says:
Okay since everyone is now an expert, here is your quiz question:
When you keep a dollar in a bank account, they don't stash a paper bill in the vault. They just keep an electronic record, and yet you obviously have money because it earns interest. But if you withdraw that money as a $1 bill, well that bill is actually just a piece of paper, right? No intrinsic value. Where did your money go at the instant of withdrawal, and who is earning interest on your money while the bill sits in your pocket?
Submit your answer to the Tea Party caucus, because they need all the help they can get.
blahedo says:
Pincher: nice trick on that question, but here's the sleight-of-hand: you're comparing two different things. When you have the piece of (linen and) paper, its "intrinsic value" may be negligible, but then, the bits in the computer that store your account also have negligible value—which is ok, because they're just used to keep track. You "have" the money when it's in your account, and you also "have" the money when you have the dollar bill in your hand or your pocket.
what the karp?!? says:
I came across a few silver certificates in the early 90's when I worked as a cashier at a McDonalds. I'd always swap them out for a regular bill and keep them. Not sure what ever happened to them though. I probably got really poor and spent them like regular money. I used to see all kinds of weird coins too, like wheat pennies and steel pennies from the WWII era. http://en.wikipedia.org/wiki/1943_steel_cent
Comradde PhysioProffe says:
Very interesting post, holmes!
JoyfulA says:
In these parts, those local bank certificates appear at estate auctions every so often. I always wondered just how they fit into modern money, and now I know. So thanks!
DaveMc says:
Totally the silver lining to a cloudy day in American-History class. Fine trivia (though pertinent nonetheless) and admirably apolitical.
Kaleberg says:
I have a United States Note that slipped into my wallet somewhere. I would never have noticed except that the waitress wouldn't take it saying it was counterfeit.
Elle says:
This is all very interesting, but doesn't answer the question of why all of your bills look roughly the same. I like foreign currency that resembles Monopoly money.
chautauqua says:
My new favorite currency is from NZ. It's made from some kind of durable plastic with a cute little transparent window that serves as an anti-counterfeiting gizmo. Best of all, you can leave it in your pocket when your jeans go through the laundry and Sir Edmund Hillary will come out at the other end looking more spruced up than before.
Keith says:
The New York Fed used to publish a comic book series explaining how banks work, the history of money, monetary policy, and the role of the Fed. I'm not sure if they still make print versions available, but the PDF versions are available here: https://www.newyorkfed.org/publications/result.cfm?comics=1