By:
Dr. Franklin Noll
At the close of the 19th century
there were five forms of currency making up the circulation of money in the U.S.
economy: The United States Notes, National Bank Notes, Gold Certificates,
Silver Certificates and the Treasury Coin Notes. Yet, despite the existence of
all these currencies, the U.S. continued to experience money-related economic
and banking crises, as the supply of these currencies could not expand or
contract to meet economic conditions.
The Early 20th Century
The Federal Reserve was established
as a possible solution. Created by the Federal Reserve Act of December 23,
1913, the Federal Reserve had the ability to change the money supply to meet
changes in the economy and financial markets. In terms of currency, it did this
primarily through the issuance of Federal Reserve Notes that were backed by
gold held in Federal Reserve Bank vaults. Issuance of notes ranging in value
from $1 to $10,000 began in 1914, and they co-circulated with the existing
types of currency.
The next significant changes to
the money supply occurred in the 1930’s. The Great Depression and the banking
crisis of 1933 forced the U.S. off of the gold standard. The Gold Reserve Act
of 1934 made it illegal for private citizens to hold Gold Certificates.
Consequently, Gold Certificates were taken out of circulation but were allowed
to be used by the Federal Reserve and the Treasury. This included the newly
printed $100,000 denomination note. In 1935, the issuance of Bank Notes ended.

The Late 20th Century
By the second half of the 20th century,
the amount of silver and silver dollar in the Treasury had declined,
threatening the metallic backing of Silver Certificates. In 1963, Congress
decided to end the issuance of the certificates. To compensate for the loss,
issuance of the $1 denomination Federal Reserve Note was authorized. On July
14, 1969, the Treasury also stopped issuing Federal Reserve Notes with values
over $100. In 1976, the $2 denomination
was added.

By this time, U.S. Notes were of
little importance in the nation’s money supply, though Congress still supported
their continued circulation. In 1966, Congress recognized the reality of the
situation and began to remove the notes from circulation. These last delivered
notes were in 1971. Then, in 1994, Congress ended the issuance of U.S. Notes.
This move made Federal Reserve notes the only form of currency available to the
general public.
In 1996, the look of Federal
Reserve Notes began to undergo major alterations as designers changed and
enlarged the portraits on some denominations. These new currency designs also
included various anti-counterfeiting devices such as security threads and
micro-printing. In 2003, the next generation currency was introduced beginning with
the $20 note. The Treasury added subtle background colors and other features to
the redesigned bills to make them more secure and difficult to counterfeit.
Next generation design reached its apex with the introduction of the new $100
in 2010.
Currency in circulation has
become much simpler, consisting of one type for each denomination up to $100;
however the actual notes themselves have become more sophisticated. With its
various security features, this seemingly simple form of money has become a
global currency and has become a measure of value around the world.
Dr. Franklin Noll is the Historian at the United States Department of the Treasury’s Bureau of Engraving and Printing, and President of the Treasury Historical Association.