By David G. Firestone
Last week, I discussed coins, and their history. The history of bank notes, or bills, is no less interesting. We spend our lives working to get bank notes, but we don’t often think about how they came to be. We tend to do that with most inventions. Interestingly, bank notes have an interesting history.
The first government to issue bank notes was the Song Dynasty in China. The Song Dynasty, in the early 11th century, allowed 16 different banks to print up the first bank notes. This was done because copper coinage is much heavier than a bank note, and that copper production was declining. Once the Song Dynasty realized the advantages of bank notes, they took over production of the notes in 1023. By the 1200’s, most Dynasties were using some form of paper bank note.
Around the 13th Century, Marco Polo and other European explorers made their way into Asia, and began to encounter paper bank notes. Polo was especially interested in these notes, stating chapter 24 in The Travels of Marco Polo:
“All these pieces of paper are, issued with as much solemnity and authority as if they were of pure gold or silver… with these pieces of paper, made as I have described, Kublai Khan causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories, and whithersoever his power and sovereignty extends… and indeed everybody takes them readily, for wheresoever a person may go throughout the Great Kaan’s dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold.”
This system was seen as effective way to transport currency from one country to another, with little confusion as to exchange rates. These early notes were not true bank notes, but were promissory notes. The note was an instruction to the bank to pay the person holding the note the amount in gold or silver. As time went on, the banks began preferring to issue bank notes as currency, and governments soon followed. For a time, there were both governments and private banks were issuing their own notes. Private banks were eventually banned from issuing their own notes as currency, and the government bank notes became the standard.
In the United States, the Federal Government is in charge of printing bank notes, though this was not always the case. The Coinage Act of 1792 specified a “dollar” to be based in the Spanish milled dollar and of 371 grains and 4 sixteenths part of a grain of pure or 416 grains (27.0g) of standard silver and an “eagle” to be 247 and 4 eighths of a grain or 270 grains (17g) of gold (again depending on purity). This was based on the Spanish Dollar, which was in use in many of the Colonies at that time. This had its drawbacks, as at the time, all 13 Colonies were each using a different state-specific currency. Each currency defined the value of a dollar differently. This system was used until 1862, when, because of The Civil War, banknotes attached to gold or silver, called gold certificates or silver certificates were issued. These could be exchanged for a set amount of gold or silver.
American bank notes are made with a special paper, which uses scrap cotton from the denim jeans industry. This helps with durability. Granted a coin will have a useful life of 30 years, whereas a bank note will have a useful life of 22 months. The paper itself is made by Crane and Company of Dalton Massachusetts, who have made this special paper since 1879. Blue jean scraps make up 75% of the material in the paper, with the other 25% being waste flax. The process is painstaking. The steps to make the paper itself, including reductions, security threads, and security strips are very exacting. The paper is then rolled into rolls and shipped.
The paper then goes to the Bureau of Engraving and Printing in either Washington D.C. Or Fort Worth Texas. The paper is cut into uniform squares, and printed using the Intaglio printing method, first used in Germany in the 1430’s. A simplified explanation of the process is that the dies that have the reverse image of the bill are filled with ink. Excess ink is removed, and the design is stamped into the bill. The ink fills all the small crevices of the die. This gives the bank note a textured feel to it, due to the different layers of ink.
While the United States has had a somewhat stable currency since the Civil War, some other countries were not as fortunate. Germany, for example, went through a lot of upheaval in the 20th Century. Prior to World War I, The German Gold Mark was the banknote Germans used. Produced in denominations of 20, 50, 100 and 1000 Mark, the bank notes are quite large, especially compared to American notes, as this 1000 Mark example from 1910 shows: The German Gold Mark was replaced in 1914, by the German Papiermark. This decision was because the link between the gold reserves and the mark was abandoned. By the end of the War in 1918, the German Papiermark was nearly worthless, due to the German loss, and insistence of Germany to pay back war debts by printing and using bank notes. The Rentenmark replaced the Papiermark as such, due to hyper inflation. It was replaced with the Reichsmark, prior to World War 11, and then the East German Mark, and Deutsche Mark from War’s end to 1990, when Germany was reunited, and the Deutsche Mark took over from 1990, until 2002, when the Euro took over as currency for Germany and much of Europe.
Another country that had a lot of economic upheaval was Russia. The Ruble is the traditional currency of Russia, and like other currencies, were made of gold or silver. The amount of metal per coin varied, until Peter The Great standardized the amount of silver in 1704. By 1768, banknotes were being printed, by the Assignation Bank. This lasted until 1843, when the Assignation Bank folded, and “state credit notes” were issued by the government.
The old system lasted until the October Revolution of 1917, when the Russian Soviet Federative Socialist Republic took over as government, and began circulating their own version of the ruble. The first version, which was used until 1922, had to be adjusted for post-war, non-gold standard hyperinflation after World War I. In 1922, the second version was instituted, this version having a rate of 1 “new” ruble for 10,000 “old” rubles, due to hyperinflation. The third change took place in 1923, at a rate of 100 to 1. This lasted until 1924, when Joesph Stalin’s consolidation of power following the death of Lenin, and Stalin issued the fourth version of the Soviet Ruble, which was attached to the gold standard, and lasted through 1947, when the fifth version, which was issued in response to citizens selling wartime rations for a profit, and keeping the money for themselves. This was placed on amounts over 3,000 rubles.
These are examples of the sixth version, used from 1961 to 1991. These brand new bank notes were designed by arists Victor Tsigal, and had a gold exchange rate of one ruble for 0.987412 gram of gold, though the gold was never offered to the general public. These are the 1, 3, 5, 10, and 25 ruble bills from 1961, the first year of issue. Bank notes, like coins have different sizes, These are the scale designs of the different bank notes I have discussed. I have to say that given recent trends, which emphasize anti-counterfeiting measures as opposed to aesthetic design, I hate United States Currency. This is the front and back of the current design, first used in 2006. This is the front and back from a $5 1953. This is the front and back of a $5 bill from 1928. This is the front and back of a $5 bill from 1896, and from 1891, 1880, and 1862. It’s amazing how much better the bill gets, the older it is. I understand that anti-counterfeiting measures are a requirement in this day in age, but can we at least make them pleasant to look at?
Next week, we will return to auto racing, with a historic piece of Funny Car memorabilia…stay tuned.