In part one we looked at coin, warehouse receipts and Silver Certificates. Now we’ll look at United States Notes , another kind of money once issued by the United States Treasury.
In 1862 the Civil War was raging and Abraham Lincoln needed lots of money to wage the war between the states. But since there was no central bank at the time to lend money into existence out of thin air (like they do today), and the outcome of the conflict was very much in doubt, the financiers (the private market) demanded exceedingly high rates to lend The Union hard money. What to do, what to do?
The was answer was simple: Issue scrip backed by nothing, declare it legal tender, and spend it on whatever was needed. Voila! Enter the United States Note.
FUN FACT: Debt free United States Notes, issued by the United States Treasury from 1862 until 1971, has been the longest running currency issue in the United States to date.
Interest and debt free legal tender scrip issued by the treasury is nothing new.