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United States Notes
Issued from 1862 to 1971, the United States Note, a paper currency also known as Legal Tender Note, was the longest-issued currency in US history. They replaced Demand Bills or 'greenbacks' in 1862 but continued carrying the nickname because of the dark green ink used to print both currencies.
In 1862, US Notes incorporated anti-forgery aspects into the face of the paper currency, following Benjamin Franklin's ground-breaking concept in 1739. US Notes are bills of credit that were inserted into the economy by the Treasury Department free of interest. US Notes are not backed by any standard are fiat money, though after 1879, federal officials were authorised to redeem in precious metal if asked to do so.
In 1863 the United States enacted the National Banking Act during the US Civil War. Later versions of this act taxed state bonds and currency, causing them to no longer be used. The US dollar became and remains the sole currency of the United States of America.
Although no longer specifically issued, US Notes are still valid currency. Most were gathered by the government, and their rarity enhances value in currency collections.
Since the Civil War ended, paper currency continued to changed in size, authorised denominations, design and relative values. The US dollar was held to a gold standard until gold bullion became more valuable than the remittance value of the coin or certificate. Then the dollar was held to a silver standard. Eventually, a tiered standard was invoked in the 1960s that allowed central banking to be conducted at $35 per troy ounce, stabilising the bank-to-bank lending practices against a solidified standard, but it prohibited banks from trading gold in a private market whose gold value could and did fluctuate. The two-tier system was dissolved in November 1973 when the disparity of bank and private value escalated and expanded beyond reasonable management between the two.
Silver and Gold Standards
The United States unofficially placed itself on a gold standard in 1853 by reducing the amount of silver in US currency. The total weight of the coins remained steady, but the weight other metals—including gold—increased. Bimetallism persisted in US coins until the late 1870s and officially removed as a standard of coinage in 1900.
However, large silver deposits were discovered in the western part of the country in the 1860s and 1870s. The controversial Bland-Allison Act in 1878, believed to be prompted and backed by the owners of the silver mines, provided freer use of silver in US coins. It required the government to purchase large quantities of silver each month to incorporate into silver dollars, in essence subsidising the mines.
The influx of silver devalued the silver in US coins, and starting in 1873, a series of legislative acts slowly switched the currency from the silver standard to the gold standard which was formally adopted on March 14, 1900 with the passage of the Gold Standard Act.
The Gold Standard Act signed on March 14, 1900 set the value of one US dollar at $20.67 per ounce of gold, the same standard possible in the bimetallic standard.
The gold standard was suspended three times—twice in 1914 during World War I (WWI), once fully and once for foreign exchange when creditors and foreign markets were liquidating debts in gold, devaluing it drastically, and once in 1933 during the Great Depression when every currency dropped the gold standard to protect what remained of US currency value.
During WWI while the United States was neutral, its currency was the sole gold-standard currency in the world. From 1915 to 1917, it freely imported or exported gold as the market would bear. After the US became involved, however, President Woodrow Wilson prohibited gold export, suspending it for foreign exchange.
After the war, countries slowly returned to a modified gold standard, and although the suspension was initially temporary, resumption was overshadowed by other concerns.
In 1933, Congress passed into law the Gold Recall Act, and all currency denominations were temporarily removed from the gold standard during the remainder of the Depression.
In 1971, President Richard Milhous Nixon unilaterally cancelled the direct convertibility of the US dollar to gold, officially ending the US currency use of the gold standard.
The government issued silver certificates from 1868 to 1964.
Initially, silver certificates were used jointly with the gold-based dollar notes and redeemed at the same face value as silver coins were and later in raw silver bullion.
Since the early 1920s, the government issued silver certificates in denominations of in $1, $5, and $10 notes. The $5 certificate carried the image of Abraham Lincoln, a practice carried later onto the $5 Federal Reserve Note.
In 1928, only $1 certificates were issued—the first small $1 bill, and the rest were recalled by the government. The $5 and $10 notes became primarily Federal Reserve Notes, which were redeemable and backed by gold.
In 1934, Congress passed a law that required each silver certificate to note the location of the silver that backed its issuance.
In 1963, President Kennedy issued Executive Order 11110 which authorised and required the Department of the Treasury to issue silver certificates for the balance of the silver held by the US not currently used to back currency, denuding the government of excess silver holdings. The notes were issued in short-term $5 notes but eventually were discontinued altogether.
The United States dollar is not backed by any physical asset. The unbacked currency is called fiat money and has only perceived value in paying debts. The fiat standard has been in use in the United States since the suspension of the gold standard in 1933.
The US Note, the US Federal Reserve Note, and US coinage compose the full spectrum of legal tender in the United States, and all are fiat monies, as are the currencies throughout much of the world.
US Federal Reserve Notes
Federal Reserve Notes are authorised under Section 411 of Title 12 of the United States Code and are issued by US Federal Reserve Banks only at the discretion of the Board of Governors of the Federal Reserve System. Federal Reserve Notes are the only type of banknotes currently in use.
The US Federal Reserve Note, a banknote first issued in 1933, is fiat currency authorised only to pay financial debt. The bills specifically state, 'this note is legal tender for all debts, public and private.' The US Federal Reserve Note should not be confused with the US Federal Reserve Bank Note, though they are both legal tender.
The US Note is a bill of credit, issued without interest, payable at face value. The Federal Reserve Note is backed by debt purchased by the Federal Reserve System, the lending intermediary between the public and the United States Treasury.
As of 1963, Federal Reserve Notes no longer carried the words, 'Payable to the Bearer on Demand,'
The Coinage Act of 1965 removed all silver from quarters and dimes, still 90% silver from colonial days. However, the Act made allowances for special issue coins, such as the Kennedy Half-Dollar.
In 1968, the pre-1963 Federal Reserve Notes were no longer redeemed for gold or silver. That allowance was later removed, and all coins now are clad—dissimilar metals bonded together.
The five-cent piece or nickel has content unchanged since 1946 and is the only United States coin whose content has remained unchanged since 1968.
All circulating notes, whether US Notes or Federal Reserve Notes, issued from 1861 to current are and will be honoured by the United States government as legal tender, meaning the government will either exchange old notes for new notes at face value or will accept as payment of a debt to the government. The government is not obligated to nor will it redeem the note for silver or gold, even if the note declares the requirement for the exchange.
The sole exception is the $10,000 gold certificate of Series 1900. A box of these certificates was accidentally thrown out a window to prevent the certificates from burning in a building fire and were, therefore, inadvertently released to the public.
The government cancelled the banknotes and considers them stolen property. The series was removed from official records. The certificates are not redeemable and hold an approximate value of $1000 only to currency collectors.
Unit of Currency v Unit of Account
Section 331 of Title 31 of the United States Code confirmed the US dollar as the unit of account in the government's constitutionally required annual spending reports. Differing from official currency declaration, the unit of account is the method by which gains and losses revenue and expenses are noted in the annual Financial Report of the US Government issued annually by the Department of the Treasury to Congress.
The 1/1000 designation in the annual Account reports and in certain taxes may have its roots in the Post-Revolution currency conversion rate that gave a Continental the equivalent value of 0.001 silver dollar.
The only Reserve Notes authorised as legal tender and payable at face value are those for denominations of 1, 5, 10, 20, 50 and 100 dollars. Also included is the 2 USD bill, though that denomination is rarely circulated, most often savoured in private collections.
Additional, discontinued denominations include those for $500, $1000, $10,000 and $100,000.
Interest-bearing notes of $500, $1000, $10,000 and $100,00 denominations were popular since their inception in 1861.
In 1878, United States Notes were issued for $5,000 and $10,000, as well.
Each denomination, bill type Colonial, US Notes, Certificates, US Notes and Federal Reserve Notes all had different sizes, colours and designs until 1928 when US Congress ordered the US Treasury to invoke dimension uniformity.
Prior to 1914, currency bills had different sizes and colours. Because each state was periodically allowed to print its own currency, sizes of the same denominations had different attributes.
From 1914 to 1928, same denomination bills had the same physical dimensions, but different denominations had different sizes.
In 1934, all denominations conformed to the same size dimensions: 2.61 inches wide by 6.14 inches long (6.6294 cm by 15.5956 cm) and 0.0043 inches (0.010922 cm) thick.
Paper Bills and Images
Presidential images are relative late-comers to US currency. Images from Greek or Roman mythology were often used. Those of Native Americans were also widely used.
George Washington adamantly refused his face on the currency, comparing it to the European monarchy; he also declined a US crown, opting instead for becoming the first President of the United States.
Only in the 1920s did full or three-quarter facial images of presidents appear on US currency. Previously, only profiles had been used, if at all.
The last coin to be converted to a presidential image was the 10-cent piece or dime in 1946. The last paper currency converted was the $1 bill in 1971 when George Washington was finally commemorated in United States currency, almost two centuries after his refusal.
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