I have been a coin collector all my life. In 1963, when I read in the Coin World newspaper that they were going to remove the silver from our coins, I asked my Dad to get as many Franklin half dollars for me as he could. He told me "No, that's silly. They'll never be worth anything." Of course, we all know that the 8 year old coin collector was proven right, and the 33 year old credit union member was not. I think this shows the value of specialists' information - regardless of the specialist's age.
Recently, I became curious about the numismatic value of my 2 dollar bills and silver certificates. Since I had never really been all that interested in paper money before, and felt ignorant, I went to the library and checked out the book "Paper Money of the United States" by Robert Friedberg. Some of the information in there is very enlightening, and I wanted to share it with all my freedom loving friends.
In general, coins (made of gold, silver, or copper) have an intrinsic value (this does not apply to US coins since 1963). When you accept such coins as money, you know what you are getting and have a solid grasp of the actual value of that money. This 'solidity' and 'known value' have never been attributes of paper money. The paper itself has virtually no value, and so the monetary worth must derive from something other than intrinsic value. Two factors give paper money value: 'security' and 'obligation'. Security refers to something of intrinsic value which is placed on deposit in exchange for the paper money. Obligation refers to a promise (generally printed directly on the paper money) which the bearer of the paper money may request be fulfilled. It is very interesting to observe the evolution of the security and obligations of the paper money of the United States of America.
In 1775, the Continental Congress authorized the issuance of currency to finance the Revolutionary War. The obligation printed on these notes read:
This bill entitles the
BEARER to receive
Three Spanish milled
Dollars, or the Value
thereof in Gold or Silver,
according to a resolution
of CONGRESS, passed
at Philadelphia Februa-
ry 17, 1776.
These notes depreciated to a point where it cost more to print than it would buy. Why? Because there was no security. The obligation turned out to be worthless without security to back it up. Also, the obligation itself is vague about who is obligated and how the note should be presented for redemption. It should be a source of neverending shame to any patriotic American that the US government has never seen fit to honor the obligations on these notes. Printing of Continental Currency ceased in 1779.
After the Revolutionary War ended, and a few years later the Articles of Confederation were deemed inadequate, the new country adopted a new Constitution. The Constitution forbids any state from making anything but gold or silver a legal tender. A mint was established in Philadelphia and in 1793 coins with true intrinsic value were produced. No paper money was produced. This situation lasted until 1861, when President Lincoln declared a national emergency upon the outbreak of the Civil War. Lincoln became what is known as a 'constitutional dictator' (for more information on this read "War and Emergency Powers" from the American Agriculture Movement) and suspended the Constitution. The Act of July 17, 1861 permitted the Treasury to print and circulate 60 million dollars in paper money. Soon the government suspended specie payment so that this new paper money could not be converted into coin. Specie payment resumed in 1879.
[Impatient readers may now skip ahead.]
Here we list the various US paper monies, and the obligations printed on each.
1861, Demand Notes, apparently no security:
The United States promise to pay to the bearer
__ Dollars on demand ... Payable by the
Assistant Treasurer of the United States at
(New York, Philadelphia, Boston, Cincinnati or
St. Louis). Receivable in payment of all
public dues.
1863-1866, Fractional Currency, not secured:
Exchangeable for United States Notes by any
Assistant Treasurer or designated U.S.
Depository in sums not less than five dollars.
Receivable in payment of all dues to the U.
States less than five Dollars.
1867-1876, Fractional Currency, not secured:
Exchangeable for United States Notes by the
Assistant Treasurers and designated
depositories of the U.S. in sums not less than
three dollars. Receivable in payment of all
dues to the United States less than five
Dollars except customs.
1870-1875, National Gold Bank Notes, secured by gold coin and United States bonds:
This note is secured by bonds of the United
States deposited with the U.S. Treasurer at
Washington ... The (name of bank and city)
will pay __ Dollars to bearer in gold coin
on demand ... This note is receivable at par
in all parts of the United States in payment
of all taxes and excises and all other dues to
the United States, except duties on imports,
and also for all salaries and other debts and
demands owing by the United States to
individuals, corporations, and associations
within the United States, except interest on
public debt.
1865-1921, Gold Certificates, secured by gold:
This certifies that there have been deposited
in the Treasury of the United States of
America __ Dollars in gold coin repayable to
the bearer on demand.
1922-1928, Gold Certificates, secured by gold:
This certifies that there have been deposited
in the Treasury of the United States of
America __ Dollars in gold coin repayable to
the bearer on demand. This certificate is a
legal tender in the amount thereof in payment
of all debts and dues public and private.
Acts of March 14, 1900, as amended and
December 24, 1919.
1929-1933, Gold Certificates, secured by gold coin:
This certifies that there have been deposited
in the Treasury of the United States of
America __ Dollars in gold coin payable to
the bearer on demand ... This certificate is a
legal tender in the amount thereof in payment
of all debts and dues public and private.
1878-1885, Silver Certificates, secured by silver dollars:
This certifies that there have been deposited
with the Treasurer of the U.S. at Washington,
D.C. payable at his office to the bearer on
demand __ silver Dollars ... This certificate
is receivable for customs, taxes and all
public dues and when so received may be
reissued.
1886-1928, Silver Certificates, secured by silver dollars:
This certifies that there have been deposited
in the Treasury of the United States __ silver
Dollars payable to the bearer on demand ...
This certificate is receivable for customs,
taxes and all public dues and when so received
may be reissued.
1929-1962, Silver Certificates, secured by silver coin:
This certifies that there is on deposit in the
Treasury of the United States of America __
Dollars in silver payable to the bearer on
demand ... This certificate is a legal tender
for all debts public and private.
1890-1891, Coin Notes, secured by silver bullion:
The United States of America will pay to
bearer __ Dollars in coin ... This note is a
legal tender at its face value in payment of
all debts public and private except when
otherwise expressly stipulated in the
contract.
1863-1907, 1916-1929, National Bank Notes, secured by US bonds:
This note is secured by bonds of the United
States deposited with the U.S. Treasurer at
Washington ... The (name of bank and location)
will pay the bearer on demand __ Dollars ...
This note is receivable at par in all parts of
the United States, in payment of all taxes and
excises and all other dues to the United
States, except duties on imports, and also for
all salaries and other debts and demands owing
by the United States to individuals,
corporations and associations within the
United States, except interest on public debt.
1908-1915, National Bank Notes, secured by US bonds or "other" securities:
This note is secured by bonds of the United
States or other securities deposited with the
U.S. Treasurer at Washington ... The (name of
bank and location) will pay the bearer on
demand __ Dollars ... This note is receivable
at par in all parts of the United States, in
payment of all taxes and excises and all other
dues to the United States, except duties on
imports, and also for all salaries and other
debts and demands owing by the United States
to individuals, corporations and associations
within the United States, except interest on
public debt.
1929-1935, National Bank Notes, secured by US bonds:
National Currency secured by United States
bonds deposited with the Treasurer of the
United States of America ... The (name of bank
and city) will pay to the bearer on demand __
Dollars ... Redeemable in lawful money of the
United States at United States Treasury or at
the bank of issue.
1915-1917, Federal Reserve Bank Notes, secured by US bonds:
Secured by United States bonds deposited with
the Treasurer of the United States of America
... The Federal Reserve Bank of (location)
will pay to the bearer on demand __ Dollars
... This note is receivable at par in all
parts of the United States in payment of all
taxes and excises and all other dues to the
United States except duties on imports and
also for all salaries and other debts and
demands owing by the United States to
individuals, corporations and associations
within the United States except interest on
public debt.
1918-1928 (?), Federal Reserve Bank Notes, secured by US bonds, certificates of indebtedness or gold notes:
Secured by United States bonds or United
States Certificates of indebtedness or United
States one year gold notes, deposited with the
Treasurer of the United States of America ...
The Federal Reserve Bank of (location) will
pay to the bearer on demand __ Dollars ...
This note is receivable at par in all parts of
the United States in payment of all taxes and
excises and all other dues to the United
States except duties on imports and also for
all salaries and other debts and demands owing
by the United States to individuals,
corporations and associations within the
United States except interest on public debt.
1929-? (not current), Federal Reserve Bank Notes, secured by "other securities:
National Currency secured by United States
bonds deposited with the Treasurer of the
United States of America or by like deposit of
other securities ... The (name of bank and
city) will pay to the bearer on demand __
Dollars ... Redeemable in lawful money of the
United States at United States Treasury or at
the bank of issue.
1862, Legal Tender Notes, apparently no security:
The United States promise to pay to the bearer
__ Dollars on demand ... Payable at the
Treasury of the United States at New York.
This note is a legal tender for all debts,
public and private, except duties on imports
and interest on the public debt, and is
exchangeable for U.S. six per cent twenty year
bonds, redeemable at the pleasure of the
United States after five years.
late 1862-1868, Legal Tender Notes, apparently no security:
The United States promise to pay to the bearer
__ Dollars on demand ... Payable at the
Treasury of the United States at New York.
This note is a legal tender for all debts,
public and private, except duties on imports
and interest on the public debt, and is
receivable in payment of all loans made to the
United States.
1869-1900, Legal Tender Notes, apparently no security:
The United States will pay to bearer __
dollars ... This note is a legal tender at its
face value for all debts public and private,
except duties on imports and interest on the
public debt.
1901-1928, Legal Tender Notes, apparently no security:
The United States of America will pay to the
bearer __ dollars ... This note is a Legal
Tender for __ dollars subject to the
provisions of Section 3588 R.S. ... This note
is a Legal Tender at its face value for all
debts public and private except duties on
imports and interest on the public debt.
1929-1962, Legal Tender Notes, apparently no security:
The United States of America will pay to the
bearer on demand __ dollars ... This note is a
legal tender at its face value for all debts
public and private.
1963-present, Legal Tender Notes, apparently no security:
This note is legal tender for all debts,
public and private.
1914-1928, Federal Reserve Notes, no security:
The United States of America will pay to the
bearer on demand __ Dollars ... This note is
receivable by all national and member banks
and Federal Reserve Banks and for all taxes,
customs and other public dues. It is
redeemable in gold on demand at the Treasury
Department of the United States in the city of
Washington, District of Columbia or in gold or
lawful money at any Federal Reserve Bank.
1929-1933, Federal Reserve Notes, no security:
The United States of America will pay to the
bearer on demand __ Dollars ... Redeemable in
gold on demand at the United States Treasury,
or in gold or lawful money at any Federal
Reserve Bank.
1934-1962, Federal Reserve Notes, no security:
This note is legal tender for all debts,
public and private, and is redeemable in
lawful money at the United States Treasury, or
at any Federal Reserve Bank.
1963-present, Federal Reserve Notes, no security:
This note is legal tender for all debts,
public and private.
Once upon a time there was a German silver coin named a Joachimsthaler. English speakers corrupted this to 'thaler', and early American settlers called the Spanish milled coin (of similar size to the thaler, and also silver) a 'dollar'. The 'pieces of eight' were in common circulation in the American colonies. Thus, the word 'dollar' has always meant a coin, specifically a large silver coin. This summary of the evolution of the definition of 'dollar' was extracted from "What Are We Using for Money" by Bakewell and "A History of United States Coinage" by Schwarz. In all cases, 'coin' is assumed. An Eagle was to have the value of ten dollars.
| Dollar grains silver | Eagle grains gold | |
|---|---|---|
| April 2, 1792 (the first Coinage Act) | 371.25 | 247.5 |
| June, 1834 | 232 | |
| January 18, 1837 | 206.25 | 258 |
| February 12, 1873 | 378 | |
| March 14, 1900 (Gold Standard Act) | 232.2 |
This is all the coinage acts say about the definition of a dollar. However, this is only because the Mint has ceased producing Constitutional dollars. Since the establishment of the Federal Reserve System, the word "dollar" in legislation refers to those Federal Reserve notes. This is not a re-definition of "dollar", but instead refers to an entirely different beast. Federal Reserve "dollars" are akin to dollars from Canada, Australia, New Zealand or Singapore. Yes, they are dollars; but they are not U.S. Constitutional money.
The 1834 act also states "...the said gold coins shall be receivable in all payments, when of full weight, according to their respective values; and when of less than full weight, at less values, proportioned to their respective actual weights". The 1873 act includes "...that any owner of silver bullion may deposit the same at any mint, to be formed into bars, or into dollars...". This last is significant, because it implies that the government considered a 'dollar' to be a coin containing a certain quantity of silver. In 1868 the Supreme Court ruled that nothing other than coined money had been recognized by legislation of the national government as lawful money.
First, security evolved from gold to gold/silver to gold/silver/bonds to "other security" to "no security required". Then the Federal Reserve was created and the obligation evolved from "redeemable for gold" to "redeemable for silver" to "legal tender". Meanwhile, the meaning of the word 'dollar' suffered substantial redefinition, from '1/20th ounce of gold' to 'this piece of paper, take it or leave it'. Historically, here's the picture:
before Lincoln - no paper money
1861-1879 - paper money not redeemable
1880-1933 - gold certificates honored
1880-1962 - silver certificates honored
1863-1907,
1916-1917 - bank notes secured by bonds exclusively
1908-1915,
1918-1928 - bank notes secured by bonds or 'other' security
1880-1928 - legal tender notes redeemable, NOT good for import
duties or interest on public debt
1914-1928 - federal reserve notes redeemable
1929-1962 - legal tender and federal reserve notes redeemable in
silver only
1963-present - fiat money
The federal government hopes the public never becomes aware of the true meaning of the current obligation. "Legal tender" means that the only value paper money has to the bearer is that the government may force someone else to accept it. And, although the Treasury still carries it on its books, one has to wonder what happened to all the gold that the Treasury accepted "on deposit" from 1861 to 1933.