Today, paper money plays an invaluable role in our economy. That was not always the case. According to the experienced coin dealers at Cincinnati’s Coins Plus, paper money held little trust with the public in pre-Civil War America. Government expenditures during the war made establishing credit imperative.

To remedy this crisis, the country established a reliable paper money system in the decades following reconstruction.  The private banking system that had plagued the Nation until that time was finally replaced with a National monetary system.

A Lingering Distrust

In Coin Plus’s last installment on the history of American currency, we discussed the passage of the National Banking Act of 1863 and the establishment of our first national currency. This legislation was essential to the country’s economy as we know it today. However, thanks to early issues with banknotes and the devaluation of Confederate paper money following the Civil War, most citizens remained skeptical. Something had to be done.  

Precautionary Measures

Following the Financial Panic of 1907, the U.S. government established the Federal Reserve which remains in place today.  This structure allows for centralized control of our monetary system. It serves “to furnish an elastic currency, to afford means of rediscounting commercial paper, [and] to establish a more effective supervision of banking in the United States," as stated in the Federal Reserve Act of 1913.

According to our local experts at Coins Plus, this banking system also created a type of paper currency called the Federal Reserve Bank Notes. These notes were backed by the Federal Government and distributed by one of twelve Federal Reserve banks.  This system sustained the country through the Great Depression of the 1930’s. Most other types of American currency were abandoned during this time making Federal Reserve Bank Notes the most used currency of the time.  

Paper Money Today

With the Federal Reserve in place and the Great Depression behind them, the American people slowly became more confident in their economy. Paper money became the most used currency, adopting a variety of forms before reaching the designs we know and use today. Many of these early iterations are highly sought after by collectors and are of particular interest to us here at Coins Plus.

Do you have early paper money in your collection that you’d like to be appraised? Want to learn more about the history of American currency? Whatever the case, you can rely on Coins Plus. Our coin dealers are experienced in all types of currency. Call us at (513) 621-1996 to schedule an appointment. For more on our coin buying services, visit us online.