The first business transactions in America were very different from those of today. American merchants and traders in the early 1600s relied heavily on the barter system. They traded one commodity for another: furs for rifles, salted fish for shoes, grain and tobacco for cloth. The British government prohibited the colonists from accepting cash for American exports, although the same colonists were often forced to pay cash for their imports. This left them with very few coins to meet the ever-increasing demands of the expanding colonial economy. Colonists had to rely on foreign coins, which were often of Spanish origin.
Learn more: View the first "money" in America.
Coins in circulation during the country's formative years were a confusing mixture of foreign coins, privately struck tokens, and colonial issues. In the 1700s, British businessmen received royal permission to mint coins for circulation in the American colonies and Ireland. The size and weight of these Rosa Americana and Wood's Hibernian coins was confusing to Americans. In fact, merchants in New York refused to accept them.
Some coins that circulated as money, even after the Revolutionary War, were tokens produced by merchants. Other coins were produced by the colonies and, later, by individual states. The first coins officially issued by the United States were the Fugio cents, coined in Connecticut in 1787 by a private contractor. To distinguish U.S. coins from British pounds, shillings, and pence, Congress adopted a decimal system based on a dollar divided into tenths (dimes) and hundreths (cents).
The establishment of the U.S. Mint in Philadelphia in 1792 did not alleviate the shortage of coins. George Washington reportedly contributed $75 worth of his personal tableware to provide the silver for the first coins. Washington's opposition to any coin using his portrait influenced Congress to adopt designs emblematic of liberty.
Learn more: View coins that circulated in early America.
Although Britain prohibited the issuance of currency by the American colonies, the colonies found ways around this. Instead, they issued "bills of credit" that were technically loans for specific public purposes such as building lighthouses, jails, or forts. The pieces of paper promising repayment of these loans often circulated just like today's paper money. In addition, at times the colonies simply issued their own paper money in defiance of the British. In 1770, George Washington recorded expenses of one of his trips on the currencies of Maryland, Virginia, and Pennsylvania. Once the Revolutionary War was declared, each colony felt free to produce its own paper money.
In 1775, the Continental Congress authorized the first issue of continental currency to help pay for the Revolutionary War. The first issue had the words "United Colonies" in the top border. Two years later, this was modified to read "United States." Unfortunately, Congress issued so much of this currency during the war that inflation became rampant and it lost much of its value. The phrase "not worth a continental" is still used today to refer to something that has become worthless.
Learn more: View paper money of the original 13 colonies.
Many types of currency circulated in the U.S. before the Civil War, but not all were accepted at face value. Because the country suffered from a general shortage of coins even after the U.S. Mint was established, people used currency, foreign coins, and private tokens as well as U.S. coins in their business transactions.
Learn more: View money from the pre-Civil War period.
The Civil War brought many changes in the money used throughout the country. In the North and East, silver and gold coins were hoarded, leading people to use tokens, stamps, encased postage, and fractional currency. The federal government issued paper currency in the form of demand notes and legal tender notes, as well as gold certificates and some interest-bearing notes. A new national banking system was established that issued national bank notes. In the West, new gold discoveries led to issues of private gold coins, while in the South, the Confederacy issued its own paper money.
Learn more: View money and tokens from the Civil War.
When the Civil War ended, national bank notes provided the U.S. with a more uniform currency. These notes were generally accepted throughout the country at face value, in contrast to the earlier state banks' notes, which ceased to be issued in 1865. Greenbacks also continued to circulate as currency, along with gold certificates. In 1873, Congress initially decided to continue minting gold dollars and only small-denomination silver coins. This led to a "Free Silver" political movement. Congress later authorized the minting of more silver dollars and Treasury issues of silver certificates redeemable in silver.
Learn more: View money issued after the Civil War and before the Federal Reserve.
When the 12 Federal Reserve Banks opened in 1914, Federal Reserve Notes began to circulate as currency along with national bank notes, silver certificates, gold certificates, and other Treasury currency. Gold certificates were withdrawn from circulation in 1933. National bank notes ceased to be issued in 1935 when Congress retired the Treasury bonds used to back them. Silver certificates ceased to be issued in 1963. New issuance of legal tender notes was discontinued in 1971. Although all of these types of notes can still be used today as currency, they have become more valuable as collectors' items. Consequently, Federal Reserve notes are now the dominant form of currency in the nation.
Learn more: View money issued after the founding of the Federal Reserve.