Greenbacks history

Paper money first issued by the U.S. Treasury during the Civil War. Unlike other notes in circulation, issued by state banks, greenbacks did not have gold or silver backing. In the 19th century, this was called “nonredeemable into specie.” As a result, greenbacks were originally viewed with great suspicion by critics who thought that the money was worthless. Unpopular when first issued in February 1862, they accounted for almost three-quarters of all notes in circulation within three years.

Opponents of greenbacks, technically nonconvertible paper money, saw their issuance as an unfair advantage to the federal government since most notes issued by banks in the individual states were required to be converted into specie (silver or gold) by the issuer. Opponents of big business and government in the 19th century, notably agrarian radicals, saw the issuance of money as a government monopoly that could be influenced by big business to serve its own ends. But the federal government was burdened with financing the Civil War and needed a way to issue money without potentially draining the Treasury. As a result, it issued the notes and at the same time borrowed large amounts of TREASURY BONDS, used to finance the war effort.

The bonds backing the notes paid their interest in gold coin to satisfy the fears of those who believed that the Treasury would bankrupt itself by issuing worthless money. At the same time, greenbacks could be used to buy Treasury bonds paying 6 percent interest, maturing in 20 years but redeemable after five years. These bonds were known as the 5–20s and became very popular due to the selling efforts of Jay Cooke & Co., which represented the Treasury in a nationwide sale of the bonds.

Greenbacks began to disappear from circulation in 1879, when the Treasury again began redeeming them with specie. The United States, along with Britain, then embarked on a GOLD STANDARD, which lasted until the 20th century, when nonconvertible paper money became the standard rather than the exception to the rule. The term has survived since the Civil War to denote paper money in general and American dollars in particular.

See also COOKE, JAY.

Further reading

• Barrett, Don. The Greenbacks and the Resumption of Specie Payments: 1862–1879. Cambridge, Mass.: Harvard University Press, 1931. 
• Goodwin, Jason. Greenback: The Almighty Dollar and the Invention of America. New York: Henry Holt, 2003. 
• Ritter, Gretchen. Gold Bugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America. New York: Cambridge University Press, 1997. 
• Unger, Irwin. The Greenback Era: A Social and Political History of American Finance, 1865–1879. Princeton, N.J.: Princeton University Press, 1964.