History

Imagine a small, fearless group of colonists, creating a new civilization out of the wilderness. In 1690, the Massachusetts Bay Colony issued the first paper money in the colonies that would later become the United States. Until that time, money consisted of gold and silver coins from England, Spain, and other countries. For many years, the Spanish Dollar coin served as the "unofficial" national currency of the American colonies. As trading started up between the settlements and coins became scarce, many colonies printed their own colonial notes.

Think about a new country struggling to shake off the chains of oppressive, foreign rule. Picture a fledgling army of colonists, led by General George Washington. To finance this army, the Continental Congress authorized the limited issuance of paper notes in 1775. Known as "Continentals," the currency had no backing in gold or silver. Instead, Continentals were backed by the anticipation of future tax revenues--redeemable only when the colonies won their independence.

The new nation was declaring its sovereignty. This marked the first time that money did not carry the image of European royalty. It was the first attempt to replace the many types of "unofficial" Colonial currency with one that would be widely accepted. Some engravers, such as Boston's Paul Revere, went so far as to create printing plates that read "The United Colonies."

Unfortunately, without solid backing by gold or silver and because so many notes were printed, Continentals soon became devalued. This lead to a popular expression of the day--"not worth a Continental." Even George Washington was heard to say, "A wagonload of Continentals will hardly purchase a wagonload of provisions."

This uncertainty created a deep distrust of paper money, an enduring theme in the evolution of American paper money. Some Colonial and Continental notes were engraved and printed by prominent statesmen and revolutionary heroes, such as Benjamin Franklin and Paul Revere, to give the paper currency credibility, but the public's distrust persisted.

In 1781, to lend further support to the Revolutionary War, the Continental Congress chartered the Bank of North America in Philadelphia as the nation's first commercial bank. Four years later, the Continental Congress adopted the dollar as the unit for national currency.