Postage Currency

 During the early years of the Civil War, in response to the political uncertainty of the time, the banking industry suspended the redemption of paper money for coin. The net effect of this action was to place a premium on coins vis-à-vis paper money and there resulted a widespread hoarding of coin by the public. Coins of all denominations were jealously guarded and hoarded and soon had all but disappeared from circulation. This was partly alleviated by small denomination (less than $1) U.S. postage stamps. People would encase the stamps and use them for trade.

  The solution, generally credited to Francis Spinner, Treasurer of the United States during the Lincoln administration, was the issuance of a form of fractional notes similar in appearance to the postage stamps they were designed to replace in circulation.
 
In all there were five different issues, or major design types, printed from 1862 until 1876, when production of these notes ceased. The designs were changed with some frequency in response to an alarming rate of counterfeiting.

Paper money after the American Revolution

  After the American Revolution, the new nation began the difficult task of building a national government. Alexander Hamilton, the first Secretary of the Treasury, conceived the idea of a central bank for the new nation. After the Constitution was adopted in 1789, Congress established The First Bank of the United States, giving it power to operate until 1811 and authorizing it to issue paper bank notes. The First Bank of the United States also served as the U.S. Treasury's fiscal agent, thus performing the first central bank functions in the United States.
 The Second Bank of the United States functioned from 1816 to 1836. Both central banks were unpopular with those wanting easy credit--primarily the western agrarian interests--and in 1832, President Andrew Jackson vetoed the recharter of the Second Bank.

  The Free Banking Era followed the demise of the First and Second Banks of the United States, marking a quarter century in which American banking was a hodgepodge of state-chartered banks without federal regulation. Had you lived between 1836 and 1866, during the Free Banking Era, your wallet would have been filled with State Bank notes of different sizes, shapes, and designs. Notes of the same denomination had different values, depending on what backed the currency. Some notes were counterfeited. Lax federal and state banking laws allowed almost anyone--states, private banks, railroads, stores, and individuals--to issue currency. A dollar issued by the "City of Atlanta" wasn't necessarily worth as much as a dollar printed by the "City of New York."

  By 1860, an estimated 8,000 different state banks were circulating worthless currency called "wildcat" or "broken" bank notes, so called because many of these banks were located in remote regions and frequently failed or "went broke." The era ended in 1863 with the passage of the National Bank Act.
  The notes above are dated 1857 and are from Omaha Nebraska. They are unsigned and the reverse are blank. The paper used is a type of onion skin making the notes fragile.

19th century obsolete U.S. banknotes

  After the Revolutionary War, paper money issued by the Colonies and the Continental Congress depreciated rapidly in value. Americans lost faith in government currency and for the next eighty years everyday commerce relied heavily on notes issued by a variety of chartered and private banks. Few of these institutions survived into the latter part of the 19th century, but their currencies are actively sought today by an avid collector community. That supports prices year after year and investors are discovering that high grade specimens can be reliable additions to their portfolios.

  Consider a pair of notes printed for the New Orleans Canal and Banking Company (ca. 1831-60s). As the scans show, both are in ideal uncirculated condition. The $10 bill features a rendering of a bald eagle. The $1000 note carries a vignette of Prosperity and Liberty seated. Twenty years ago, they sold for $10 and $40, respectively. Two years ago, I bought the specimens pictured for $48 and $160. Earlier this week, I sold them for $70 and $240. The difference in price between the two is a function of rarity. Two to four high grade examples of the $10 note are offered for auction each week. One sees the $1000 note perhaps ten times a year.

  Consider also the $10 bill put into circulation around 1860 by Canal Bank rival, the Citizens Bank of Louisiana (1833-1911). At least one of these appears for auction every couple of weeks, but there is an interesting story associated with the note and it commands high prices. Citizens Bank catered to culturally diverse New Orleans with bilingual currency. In this case, the front of the note was in English and the back featured French. People referred to the bill by its French denomination (DIX) and soon the term "Dixie" pertained not only to the note, but to the South itself. Some historians dispute this interpretation, but it's a cute story and the DIX note has become something of a numismatic celebrity.

  As with any collectible, investment in obsolete bank notes requires a degree of sophistication. The comprehensive grade and population figures available to certified coin collectors just don't exist for the obsolete notes. The two major third-party coin graders are among a small number of outfits now grading notes, but the services have only been offered for a few years. Descriptions of most of the specimens on sale come from the persons selling them, or from their auction house representatives. Photos and scans are often made available though and important features are normally visible. It's worth taking a look. Trends in high grade note prices are positive, rendering many types solid investment opportunities.

5000

   Certainly the key piece in this offering of Legal Tenders, and one of the key pieces in all of Federal currency. The Dauers have illustrated both sides of this note on page 142 of their American History As Seen Through Currency.Along with the photos comes the following caption: “All the $5,000 and $10,000 Legal Tender notes of 1878 have been redeemed and destroyed by the Treasury Department. The note above is a specimen furnished to the Chinese Government. Proof or specimen notes are usually either printed on cardboard or have a blank reverse. This note is printed on both sides and on legitimate currency paper. It is thus highly desired by collectors and it is the only surviving example of this design.”
All of the above is wholly correct, but there is considerably more to tell. This note has only three minor differences from the regular issue: three stars fill each serial number box, each signature has three small cancels, and the Chinese Government presentation is overprinted between the signatures. Save for that, it is a totally legitimate piece of currency.
It is also the only $5,000 Large Size note of any issue or design that is available to the collecting public. To our knowledge, there are no other Large Size notes of any denomination in this category. The note is more akin to a sample than a specimen.
Whatever category you place this note in, it is an irreplaceable part of US currency history and the key to assembling a complete set of U.S. currency by Friedberg number.

trading

    Ponterio & Associates, a division of Bowers and Merena, will present the world and ancients auction of coins and paper money, more than 2,300 lots, including over 1,500 lots of Ancient and foreign coins and 828 lots of world paper money.
  Prior to the auction, lot viewing opportunities for U.S. currency lots will include a special viewing at the Memphis International Paper Money Show on Thursday, June 17, from noon to 5 p.m. CT, when the notes will then travel to Baltimore for the live auction and viewing at the Expo. Matt Quinn, director of currency auctions, is enthusiastic about the impressive highlights that will cross the auction block. “We have two magnificent sheets of currency to offer, with the first being a tremendous uncut sheet of Rhode Island Colonials. The Catalog numbers range from RI-282 to 289, with two of each denomination seen, seldom seen in such a large format. The other significant uncut grouping of notes is one of the finest sheets of Silver Certificates we have come across. The sheet is an Uncut Sheet of 12 Fr. 1654 1934D Five Dollar notes encapsulated in a Superb Gem 68PPQ holder by PCGS Currency. This stunning sheet of notes is flawless to the naked eye.
  Some important National Banknotes in the catalog start with a highly scarce large size 1902 Five Dollar Plain Back with the second bank name for charter 9745. This County National Bank of Santa Cruz note retains nice appeal and is likely missing from even comprehensive California collections. The second notable National comes from Muscogee, Indian Territory with the Charter number of 4385. “Territorial notes are ever popular pieces which always command a premium,” Quinn said, “as mostly all in the National Banknote section of the hobby aspire to own one.”
  The type collectors will also be fortunate to participate in the sale with a few notable high grade large size pieces available. Quinn added, “One of the most pleasing examples we have seen in some time for Friedberg number 21 will be presented to the collecting community bearing the challenging series ‘A,’ in a robust PCGS Extremely Fine 45PPQ holder. Next a wonderful Fr. 116 1901 $10 Bison note will cross the block encapsulated in a PMG Superb Gem Uncirculated 66EPQ grade which really wrings out all the detail the design could offer. A tasteful selection of high grade Gold Certificates will be the staple in the end of the large size type selection with many outstanding Gem notes seen.

created in Japan

                                     Japan banknote on left, U.S. banknote on right
 153 national banks began to eventually issue paper currency which were originally printed in the United States and therefore, bore a striking resemblance to U.S. paper currency of that period (see below). Japan eventually began designing and printing its own banknotes in the late 1890's.

$500 banknote

  $500 banknote circulated for 41 years, and has been out of circulation for 43 years. At the time it was taken out of circulation there was fewer than one $100 banknote per person in this country, and nearly all $100 banknotes circulated domestically.

 The only reason it was discontinued is that it was perceived to help criminals (including counterfeiters). Today a $100 is worth less than $20 43 years ago. The only valid reason not to restore the $500 banknote is that it helps criminals.

 There is no other valid reason. It would help the Treasury logistically if they could go back to the larger notes. They could afford more security features. It would be much easier to replace the current supply of 8 billion Benjamins with 3 billion new $100 Benjamins, and 1 billion new $500 notes .

           This is the more interesting 1918 version.