Both United States Notes and Federal Reserve Notes are parts of the national currency of the United States and both have been legal tender since the gold recall of 1933. Both have been used in circulation as money in the same way. However, the issuing authority for them came from different statutes. United States Notes were created as fiat currency, in that the government has never categorically guaranteed to redeem them for precious metal - even though at times, such as after the specie resumption of 1879, federal officials were authorized to do so if requested. The difference between a United States Note and a Federal Reserve Note is that a United States Note represented a "bill of credit" where the currency was transferred into circulation free of interest. Federal Reserve Notes are based on debt purchased by the Federal Reserve, and thus generate seigniorage for the Federal Reserve System which serves as a lending intermediary between the Treasury and the public.
Characteristics
Like all U.S. currency, United States Notes were produced in a large sized format until 1929 at which point the notes' sizes were reduced to the small size format of the present day.
The original large-sized Civil War issues were dated 1862 and 1863 and issued in denominations of $1, $2, $5, $10, $20, $50, $100, $500 and $1000. The United States Notes were dramatically redesigned for the Series of 1869, the so-called Rainbow Notes. The notes were again redesigned in the Series of 1874, 1875 and 1878. The Series of 1878 included, for the first and last time, notes of $5,000 and $10,000 denominations. The final across-the-board redesign of the large-sized notes was the Series of 1880. Individual denominations were redesigned in 1901, 1907, 1917 and 1923.
On small sized United States Notes the treasury seal and the serial numbers are printed in red (contrasting with Federal Reserve Notes, where they usually appear in green). By the time the small size format was adopted, the Federal Reserve System was already in place and there was limited need for United States Notes. They were mainly issued in $2 and $5 denominations in the Series years of 1928, 1953 and 1963. There was a limited issue of $1 notes in the Series of 1928, and an issue of $100 notes in the Series year of 1966 mainly to satisfy legacy legal requirements of maintaining the mandated quantity in circulation.
Politics and controversy
The concept of replacing precious metals with fiat paper as the medium of exchange has always been contentious and attracted attention.
During the 1870s and 1880s the Greenback Party existed for the primary purpose of advocating this fiat paper money as a way of creating inflation according to the quantity theory of money. As the 1870's unfolded, however, the market price of silver fell with respect to gold, and inflationists found a new cause in the Free Silver movement. Opposition to the resumption of gold convertibility of the Greenbacks in 1879 was accordingly muted. |
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