This guest post comes from Michael, a contributing editor of the Dough Roller, a personal finance and investing blog, and Credit Card Offers IQ, a credit card review site. I am sure that you, like me, will enjoy reading the history of paper currency in the United States. Thanks, Michael, for your research.
Depending on how old you are, you’ve probably seen a lot of changes to the way paper currency has been printed. It wasn’t long ago that the government was backing US currency with gold bullion and depositing a $100,000 bill into your savings account was possible. Since the first print of paper currency in 1690, the United States has seen hundreds of changes to the way money is printed, handled and destroyed. I think a history lesson is in order!
In 1690, the Massachusetts Bay Colony issued the first paper currency in the colonies of the United States. In 1775, just before the Revolutionary War, the Continental Congress printed a new currency, backed by the anticipation of tax revenues. As you would expect the notes were easy to forge and when no tax revenues came, the bills became worthless. Just after the Revolutionary War, the Bank of North America, located in Philadelphia, was nominated as the “Nations First Bank.” Four years later in 1781, the concept of the dollar was born and the coin to represent this decision would be struck several years later.
The monetary system was officially in business with the creation of the Philadelphia Mint and in 1836, there were over 30,000 varieties of paper currency. 1,600 banks were printing bills with different colors, shapes and sizes, causing chaos among merchants. This continued for over forty years, until the Bureau of Engraving and Printing was established in 1877. Thirty years later, all currency was printed by the United States government and not by individual banks, dealing a solid blow to the counterfeiting business.
Federal Reserve Act
Undoubtedly, the most important decision was to create the Federal Reserve act of 1913, which authorized the Federal Reserve System to regulate the flow of money. This meant the regulation of paper currency in order to control and stabilize the economy. Without this act, currency could be over and under printed, causing massive amounts of fluctuation within our economy.
Now with that out of the way, let’s talk actual currency design. In 1929 the size of paper currency was reduced by 25% (to the size you see today) to save money on, well, printing money. At the time, there were six different types of US currency in circulation and when the Great Depression hit, that number was quickly reduced to three. Two decades following the Great Depression, the United States was left with one type of currency, which is what you see in circulation today.
In God We Trust
“In God We Trust” was added to all currency in 1957, and it wasn’t until 1990 that the last significant change to currency was made, the addition of security threads and holograms. Any change to currency now is done specifically to thwart counterfeiting and bills over $100 are no longer printed for this specific reason.
Today, six denominations of US currency are printed ($1, $5, $10, $20, $50 and $100) and it’s the $1 bill that remains unique when compared to the rest. That $1 bill has certainly seen a lot of changes in its lifetime and it’s certainly going to see many more. Currently, the dollar is holding strong against the Euro and with continued security updates to US currency, expect it to strengthen even more during the coming years.