I have a general question that I can't seem to find an answer to. It seems there were a lot of different types of currency circulating during the late 1800's, particularly United States Notes and National Banknotes. What I'm wondering is, was either one more commonly used in everyday life than the other, or was it about the same? Was it normal for people to carry both types? Did it depend on location? Apologies if this is the wrong place to post this question. Thanks!
Good question. There were many other notes circulating in the late 1800's. We can't answer your question without narrowing the date range some more. Depending on the decade, some notes were more common then others. Fractional currency was huge in the late 1860's and 1870's. But by the 1880's, they began to disappear from circulation. National Bank Notes were issued since the 1860's. Since banks issued their own currency, National Currency generally circulated in the areas they were issued and redeemed. If you did not live near a bank that issued currency, chances are you didn't carry their notes. If you lived in New York City, which had numerous banks, you might carry National Currency. Some people were discriminant and preferred one type of currency more than another, depending on how it was backed and how it could be redeemed. Demand notes were very common in the 1860's. Legal Tender (United States Notes) were big in the 1870's onward. Silver Certificates were a big hit, but not until they were issued in the late 1880's. Gold Certificates were issued in the 1860's, but they weren't really seen in circulation until the 1880's. They weren't common still, because in the 1800's they were only issued in large denominations of $20 and up. Starting with the series 1907, they were issued in $10 denominations. Gold Certificates were more frequently used in bank to bank transfers, since they were issued in denominations up to $10,000. Treasury/Coin notes made a short run, and were mainly in circulation in the 1890's. They could still be found from time to time. There were many varieties were in circulation between 1862 and 1899: - United States Notes (Legal Tender) - Silver Certificates - Demand Notes - National Bank Notes & National Gold Bank Notes - Gold Certificates - Treasury/Coin Notes - Interest & Compound Interest Bearing Notes - Refund Certificates - Fractional Currency - Stamps, Stamp Envelopes, and Encased Postage Federal Reserve Notes came around in the next century. In the 1860's, Demand Notes and Fractional Currency were common. Fractional currency was a very interesting phenomenon that was born during the civil war, a time when many people started to hoard coins. Fractional Currency were authorized in 1862 by Abe Lincoln, and quickly became popular. They were very common in the 1860's and 1870's, but began to disappear by the 1880's as coin production ramped up and hoarding weened. Due to the lack of coinage in the 1860's, postage stamps were used for purchases and to make change. Stamps were small and annoying to handle. Someone came up with the idea to put the stamps envelopes with the amount printed on the outside. I'm not sure why - but cashiers did not bother to count the stamps inside. In turn, some people tried to scam sellers, my removing stamps from these envelopes, yet using the envelope at face value. These were replaced with encased postage - another brief currency phenomenon in the early days of U.S. paper money. Stamps were placed into coin-like holders, which often cotained an advertisement by the manufacturer or sponsor, on the reverse. In 1862, Lincoln stepped in and authorized the issuance of Fractional Currency. The first issue actually had pictures of stamps on the face. Check out this 1st issue $0.25. First Issue These evolved over the course of multiple issues, which looked substantially different. The primary reason was to prevent counterfeiting. Second Issue Third Issue Fourth Issue Fifth Issue By the late 1870's, fractional currency virtually disappeared from circulation due to the increased production of coins. By the 1880's, Legal Tender (U.S. Notes) and National Currency were commonly seen. In the late 1880's Silver Certificates took off. These 3 types were the most commonly seen until the end of the century.
Corrections to my post above: Demand Notes were produced and released to the public in 1861, not 1862. Although stamps were authorized for payment of debts in 1862, the Fractional Currency we know today wasn't printed until 1863.
Very interesting. So I guess US Notes, Nationals, and Silver Certificates were all pretty common to see until the FRN's were introduced. Thanks for the info!
Before 1879, there was a big division between Gold Certificates and everything else. U.S. Notes and Nationals were not redeemable in gold, and traded at a discount to gold and Gold Certificates. At times during the Civil War, the discount was rather large, with $10 in gold/GCs buying $20 in USNs/Nationals. As the economy got back on its feet after the war, the gap closed somewhat but remained significant. On January 1, 1879 the U.S. government resumed specie payments, and the USNs (and thus indirectly, Nationals too) became equivalent to gold. From that point onward, there was little *practical* difference between the various currency types--if you had a government-issued $20 bill in your pocket, it was worth $20 to anyone, no matter what type of $20 bill it was. There were still plenty of *legal* differences, in the form of rules about which types could be used for customs duties and for bank reserves and such, as well as restrictions on how much of each type the Treasury was allowed to issue; but over time these rules began to look rather silly since all the different types circulated pretty much interchangeably. So, gradually, even the legal distinctions between the types were blurred by newer legislation. GCs and SCs were eventually discontinued (in 1934 and 1968 respectively) because the price of gold and, later, silver threatened to become high enough to break the equivalence of currency types again. But Nationals and USNs and such were discontinued essentially because, after all of the legal changes, they had become so similar to FRNs that it wasn't worth the trouble to print these notes *and* FRNs too. (I'm oversimplifying here, but that's the short version of the story.)
I remember reading about a virtually infinite profit loop that some people exploited using metal-backed notes, due to the difference in valuation. I can't remember how it was done exactly.
That was later, with the Coin Notes in the 1890s. Those were sort of a weird hybrid of gold and silver certificates--they were redeemable "in coin" but they didn't specify *which* coin. The backstory is that the price of silver was falling, and there was political pressure to increase the size of the silver coins in order to maintain their value relative to the gold coins. Rather than doing that, the politicians decided to try to prop up the silver price by having the Treasury buy up lots of silver (and coin most of it into Morgan dollars). When that didn't keep the silver price from falling too low, the silver miners somehow convinced Congress to create the Coin Notes and order the Treasury to use them to purchase even *more* silver bullion. The idea was that since these notes were redeemable in gold as well as silver, they couldn't possibly fall in value no matter how low the silver price got. So the mines would sell their silver to the Treasury for Coin Notes and then redeem them for *gold* coin, turning their silver into gold at a much more favorable ratio than they could get in the market at the time. Basically, the silver miners had so much political power that they got Congress to give them a key to the Treasury. It took only a few years before the Treasury was in danger of running out of gold as a result of the giveaway. Since international payments at the time were made in gold, running out of gold would have been functionally equivalent to bankruptcy. So the Treasury declared that henceforth the Coin Notes would only be redeemed in *silver* coin. (The new administration in 1893 had a lot to do with this too--Cleveland wasn't nearly as supportive of the silver miners as Harrison had been.) That also explains why the Coin Notes weren't around for long. Once the Treasury quit paying them in gold, they were basically Silver Certificates by another name, and so they were soon discontinued in favor of actual Silver Certificates. Incidentally, despite the fact that silver coins finally ended up with a metal value less than half their face value by the mid-'90s, both gold and silver continued to circulate pretty much uninterrupted. If you had a silver dollar and you wanted to trade it for a gold dollar, you could do that without too much trouble. By this time, the general populace had pretty much gotten used to the idea that money was worth what the government said it was worth, and didn't really care whether a silver dollar had a dollar worth of silver in it (for day-to-day payment purposes, anyway--some of them cared about it quite a lot for its political consequences). Such questions only became relevant if you were trying to transact business internationally (where payments in silver were often not acceptable) or to deal in bullion rather than coined money. Later on, in the 1930s and then the 1960s, the government took advantage of the public's relative unconcern for such matters to get away with quite a bit more than it had in the 1800s. And thus today we have fiat currency and nobody much minds.
