United States Notes

United States Notes were first issued in 1862. They were issued under the Congressional Act of July 11, 1862. This act supersedes that Act of July 17, 1861 which issued the Demand Notes.

United States Notes were the first permanent kind of federal paper money issued by the United States government. Previously, the Treasury issued bonds and interest bearing notes and a single issue of non-interest bearing notes during the war of 1812. Bonds and Interest Bearing Notes were also issued during the Civil War, but then the idea of Legal Tender Notes that paid no interest but were intended for "all debts public and private, except duties on imports and interest on the public debt" was introduced. There was wide spread objection to these notes on the grounds that the Constitution granted the federal government the power "to coin Money, regulate the Value thereof...," which implied that "Money" was coinage and could not simply be replaced by a paper obligation. This issue was fought out in the Supreme Court, ultimately to the advantage of the federal government. However, after the Civil War, Congress had no intention of relying on paper money. That would have been unacceptable in international trade and finance in that day and age of the Gold Standard. Also, the downfall of price inflation that had been previously associated with paper money had already started to show. This was even more evident at the time because gold coinage had not been withdrawn or demonetized but continued to circulate at a premium alongside the greenbacks. People could see day to day that gold dollars were more valuable than paper dollars.

Congress became determined to withdraw the paper currency but this helped to produce a deflation, which hurt debtors. The Greenback Party promoted more paper money and inflated debts. This political agitation stopped the actual withdrawal of the United States Notes, but the rapid growth of the U.S. economy nevertheless continued the deflation. By 1878 greenbacks were trading at par with gold dollars, and the United States government "resumed specie payments," i.e. began to honor all its gold obligations and would "pay the bearer on demand" gold dollars. Circulating United States Notes were then frozen at a total value of $346,681,016.

Over time, United States Notes became an increasingly minor part of United States currency. By 1910, U.S. Notes only accounted for a tenth of all currency, and by 1960 for only a hundreth. Thus, this form of currency came to be considered a nuisance. In 1966 it was decided to discontinue current issues ($2 in 1966 and $5 in 1968) and to simply concentrate on satisfying the law of 1878 with a new $100 note issue. Few of these, however, made their way to the public. The Treasury maintained this number by storing $100's to meet this obligation. By the 1990's, when U.S. Notes would count for less than a thousanth of U.S. currency, it was considered time to end this procedure, and Congress eliminated the statutory requirement that the Treasury issue them.

This type of note was printed in denominations of $1.00, $2.00, $5.00, $10.00, $20.00, $50.00, $100.00, $500.00, $1000.00, $5000.00 and $10,000.00.

These notes are commonly called "Legal Tenders" because of their payment obligation stating "This Note is a Legal Tender.."

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