Although paper currency is associated with modern times, this form of monetary exchange in the United States dates to before the signing of the Constitution. As with many endeavors in the New World, Benjamin Franklin played an essential role in the life of paper currency in the U.S.
Franklin’s Role in Early Money
In 1690, the Massachusetts Bay Colony began issuing paper notes to fund military expenditures, and other colonies quickly followed suit. Franklin’s first foray into paper money was in 1739 when he used his printing firm to produce colonial notes with unique nature prints that could not be replicated by would-be counterfeiters. His secret was using actual leaf prints, replicating the vein tracings with lead casts. On some bills, he deliberately misspelled Pennsylvania. Franklin was also one of the earliest proponents of paper money, arguing that the colonies could not survive on gold coins and silver coins alone.
The Introduction of Demand Notes
Despite Franklin’s efforts, the Continental Congress’s paper money, introduced to fund the Revolutionary War efforts in 1775, lost value because of a rise in counterfeiting and an absence of reliable backing. Just nine days after the Constitution was signed in 1776, $2 “bills of credit” were introduced. These were followed in 1861 by Civil War-era greenbacks, non-interest-bearing Demand Notes that are still redeemable at face value today. Later that year, the first $10 bill was introduced as a Demand Note. The following year, United States notes were introduced. These bills, designated by a red seal and serial number, remained in circulation until 1971.
The Formation of A Government Agency for Printing
Until 1869, Demand Notes and other forms of paper currency were produced by private companies. Starting that year, the production of paper money was centralized in the Bureau of Engraving and Printing. The next major change in the financial system came with the establishment of the Federal Reserve in 1913. In 1929, U.S. currency was modified in size to its current dimensions. Large bills issued prior to this time are commonly referred to as “blanket notes.”
While early settlers traded with shells, stones, coins, and other tangible goods, the establishment of paper currency was a foundation of the colonial United States.