What passed for money in the U.S. prior to the Civil War? The answers might surprise you.

BillJones

Here is another piece from my used article file. I hope you enjoy it.

Many collectors who have used A Guide Book of United States Coins, which is also known as "The Red Book," believe that the listings in that venerable information source cover most of the coins that circulated in The United States from 1793 until the Civil War. Those listings are impressive. For page after page there are columns and lines for coins in ten denominations struck at five minting locations that were often issued for consecutive years. Yet the reality is those coins represent only a small minority of what was circulating for money during more than the first half century of our country's history. What passed for money in those formative years took many forms and came from many sources.

America's money problems existed throughout the colonial period, but they were never worse than during the time from 1782 when the Revolutionary War ended to 1788 when the Constitution began to take effect. Although the Americans had many complaints about their trade relations with the British, which led the Revolutionary War, the situation got worse financially after we gained our independence. As a part of the British Empire, the Americans had enjoyed a steady trade with the mother country. Now, as an outsider, American exports dropped dramatically, and the U.S. economy suffered.

There was also a severe shortage of money available to circulate within the U.S. During the war the Continental Congress issued so much Continental Currency that it had become worthless. This situation made it impossible for the Congress to issue any more paper money, and only a few of the state governments tried to issue notes. State chartered banks issued some paper money, and this trend would continue and expand before and during the Civil War.

Small change in the form of copper coins came from many sources. The most popular prototype design resembled the British copper half penny, but very few genuine half pennies circulated in America. Most of the coins were authorized by the states, were private issues or were outright counterfeits.

Connecticut, Massachusetts, New Jersey and the independent Republic of Vermont issued copper coins in their name. Today the most often seen collector coins are the Connecticut and New Jersey pieces which were struck by private contractors. Massachusetts operated the only state run mint, and its coins were the first pieces to have the word "CENT" as a part of their design. All Vermont Republic coins are very scarce, and most were crudely made.

The Nova Constellatio coppers were produced in England and imported to America as a money making project for early American financiers Robert Morris and Gouverneur Morris. (These two gentlemen named Morris were not related.) These coins, which were almost all made in 1783 and 1885, had the same design as the extremely rare Nova Constellatio silver coinage. Earlier Robert Morris had proposed the Nova Constellatio silver pieces as a national coinage, but the Continental Congress had had insufficient funds to sponsor it.

One of the most interesting of all the mints that operated during this era was Machin's Mills which was located near Newburgh, New York. Thomas Machin, who was the principle owner of the firm, combined his efforts with other partners to produce both legitimate and counterfeit coins. His products included genuine Vermont coppers, counterfeit George III half pennies and quasi legitimate Connecticut and New Jersey coppers.

John Bailey and Ephraim Brasher partnered to form a mint near New York City. They petitioned the State of New York for the right to produce copper coins for the Empire State but never obtained an official franchise. Nevertheless they produced the Excelsior and Nova Eborac pieces which had semiofficial status. Brasher is best known for the Brasher gold Doubloon which is now one of the most desired and most expensive early American rarities. His Nova Eborac coppers are considerably more collectable, and some of the letter punches that were used to make the dies for those copper pieces were also used for the Brasher Doubloon dies.

Finally there were many counterfeit copper coins which came from various sources. These were collectively called "Bung town coppers," and were almost always light weight counterfeits of the British half penny. These pieces, which were made to look worn from the day they were made, had an odd looking head on one side and a seated figure on the other. The words on these pieces were sometimes misspelled or gibberish. The idea was NOT to duplicate the genuine coins to avoid a counterfeiting charge, at least in the strictest sense.

The glut of copper coins in circulation in the 1780s finally caused their value to collapse. There were simply too many of them. The Confederation Government attempted to fix the problem by authorizing the production of the Fugio Cents, but that effort failed when it was found that those coins were also too light to be traded at the desired rate of 100 pieces to the Spanish Milled dollar.

So far gold and silver coinage was concerned, most of the coins that circulated in America were Spanish (by a wide margin), British and French in that order. The coinage of other European nations circulated in The United States as well. Just about any gold or silver coin that looked credible had a chance of gaining acceptance.

After the first U.S. Mint opened in Philadelphia in 1792, the situation did not change markedly. The capacity of the first mint was inadequate to serve the nation's needs. In addition the attempt to establish the bimetallic monetary system (the coinage of gold and silver coins circulating side by side at a fixed ratio between the two medals, e.g. 15 or 16 parts of silver = 1 part of gold) only resulted in driving either gold or silver coinage out of circulation at one time or another.

There were issues with each of the coins that the Philadelphia Mint issued that prevented full public acceptance. The half cent was looked down upon as "a poor man's coin," and merchants did not like them because the coin cut into their profits. Citizens viewed the large cent as heavy and inconvenient to use. The big cents saw very little circulation outside of the major cities. Half dimes, dimes and quarters were not issued consistently and were short supply. Those who deposited silver at the first mint often demanded the largest silver coin available which was the silver dollar in the early years and the half dollar after the dollar coinage was suspended. Half dollars were mostly held by banks to back their currencies, and did not see a lot of circulation. President Thomas Jefferson halted the coinage of silver dollars and $10 gold pieces in 1804 in an attempt to prevent the flow of gold and silver out of the country. In any case the intrinsic value of the early gold coins prevented their wide spread use because their gold content exceeded their face value. Many U.S. early gold coins were exported to Europe and melted.

So what did circulate in America before the Civil War? The answer is foreign coins from Europe and, much more often, their Mexican and South American colonies. Later, as those nations won their independence from their European masters, their coins circulated extensively in the U.S. The U.S. Government recognized the importance of these coins to the U.S. economy by providing them legal tender status. That legal tender status would not be repealed until 1857.

In addition to foreign coins, state charted banks issued paper money in large quantities. The bank note currency was only as good as the institution that issued it. Currency that was issued from a local bank that had a sound financial reputation might trade for 90 to 100 % of its face value. Money issued by a non-local bank or a bank whose reputation was shaky was accepted at a discount or not at all. Fortunately most early to mid 19th century Americans seldom ventured more than five or ten miles from their home during their entire lives. As a result most Americans were not overly concerned about "traveling money." Although most banks made an effort to be financially sound, a few were fraudulent concerns that issued paper money without even opening their doors. The term "wild cat bank" was popular because it was said that for some banks, one needed to be a wild animal to find the redemption center.

This $2 note was issued by a failed bank that was in Milford, Delaware.

It is not hard to see that such a haphazard monetary system was not conducive to fostering a robust national economy. Reform was needed, and it came during what some might think was an unusual time, the Civil War. On February 25, 1863 Abraham Lincoln signed the National Currency Act. That bill provided for the establishment of National Banks, which were authorized to issue U.S. Government currency with the issuing bank's name on it. The banks were permitted to issue currency equal in value of up to 90% of the worth of Government bonds that the bank deposited with U.S. Treasury.

This legislation achieved two objectives. First, it provided funding for the Union to conduct the Civil War and supported a broader market for Union bonds. Second, it brought a much higher level of order to the nation's monetary system, which had been flooded with state bank notes. The term "broken bank notes" is often applied to these pieces of paper money, and in a sense that was not too far off the mark. National Bank notes, which were backed by U.S. Government securities, were far more dependable than state bank notes that had only the support of one private institution.

In 1865 the circle was completed when the U.S. Government levied a 10% tax on privately issued bank notes, which essentially ended the practice of issuing them. Although the phrase "The ability to tax carries with it the ability to destroy," is true enough, in this case the tax on privately issued bank notes worked for the benefit of the public.

After the Civil War, the national monetary system became far more standardized . In December 1878, the government was in the position to redeem its paper money in gold which restored public confidence in the monetary system. This long sought achievement ushered in the beginning of the modern monetary era in America.

DIMEMAN

Very interesting read.

oih82w8

I wrote a paper for economics class which included many barter items including nails...that is what I first thought of with the OP title.

Bob13

These are great - keep 'em coming. In addition to the history, I like that Vermont Landscape copper - hard to find that nice.

northcoin

@Bob13 said:
These are great - keep 'em coming. In addition to the history, I like that Vermont Landscape copper - hard to find that nice.

+1

stevek

<<< So what did circulate in America before the Civil War? The answer is foreign coins from Europe and, much more often, their Mexican and South American colonies. Later, as those nations won their independence from their European masters, their coins circulated extensively in the U.S. The U.S. Government recognized the importance of these coins to the U.S. economy by providing them legal tender status. That legal tender status would not be repealed until 1857. >>>

Cool article - Very enjoyable read.

1630Boston

Great info, thanks for sharing it here.......

SaorAlba

"In 1865 the circle was completed when the U.S. Government levied a 10% tax on privately issued bank notes, which essentially ended the practice of issuing them. Although the phrase "The ability to tax carries with it the ability to destroy," is true enough, in this case the tax on privately issued bank notes worked for the benefit of the public."

Curiously though enforcement of the tax was haphazard especially in the South after the war. Some impetus behind that might have been that economic necessity dictated that enforcement of the levy could be lax - but there are instances of outright evasion by masking notes as "transport tickets", "deposit receipts" etc. But even in the North there are some outright evasive issued banknotes by National Banks continuing to issue state authorized notes into the 1870s - I own one from the Meriden National Bank in Connecticut that was issued in 1873.

BillJones

Thanks for the additional insights, @saorAlba.

jonruns

Thanks for teaching me a lot of new stuff Bill!!!

CyndieChildress

@BillJones said:
Here is another piece from my used article file. I hope you enjoy it.

Many collectors who have used A Guide Book of United States Coins, which is also known as "The Red Book," believe that the listings in that venerable information source cover most of the coins that circulated in The United States from 1793 until the Civil War. Those listings are impressive. For page after page there are columns and lines for coins in ten denominations struck at five minting locations that were often issued for consecutive years. Yet the reality is those coins represent only a small minority of what was circulating for money during more than the first half century of our country's history. What passed for money in those formative years took many forms and came from many sources.

America's money problems existed throughout the colonial period, but they were never worse than during the time from 1782 when the Revolutionary War ended to 1788 when the Constitution began to take effect. Although the Americans had many complaints about their trade relations with the British, which led the Revolutionary War, the situation got worse financially after we gained our independence. As a part of the British Empire, the Americans had enjoyed a steady trade with the mother country. Now, as an outsider, American exports dropped dramatically, and the U.S. economy suffered.

There was also a severe shortage of money available to circulate within the U.S. During the war the Continental Congress issued so much Continental Currency that it had become worthless. This situation made it impossible for the Congress to issue any more paper money, and only a few of the state governments tried to issue notes. State chartered banks issued some paper money, and this trend would continue and expand before and during the Civil War.

Small change in the form of copper coins came from many sources. The most popular prototype design resembled the British copper half penny, but very few genuine half pennies circulated in America. Most of the coins were authorized by the states, were private issues or were outright counterfeits.

Connecticut, Massachusetts, New Jersey and the independent Republic of Vermont issued copper coins in their name. Today the most often seen collector coins are the Connecticut and New Jersey pieces which were struck by private contractors. Massachusetts operated the only state run mint, and its coins were the first pieces to have the word "CENT" as a part of their design. All Vermont Republic coins are very scarce, and most were crudely made.

The Nova Constellatio coppers were produced in England and imported to America as a money making project for early American financiers Robert Morris and Gouverneur Morris. (These two gentlemen named Morris were not related.) These coins, which were almost all made in 1783 and 1885, had the same design as the extremely rare Nova Constellatio silver coinage. Earlier Robert Morris had proposed the Nova Constellatio silver pieces as a national coinage, but the Continental Congress had had insufficient funds to sponsor it.

One of the most interesting of all the mints that operated during this era was Machin's Mills which was located near Newburgh, New York. Thomas Machin, who was the principle owner of the firm, combined his efforts with other partners to produce both legitimate and counterfeit coins. His products included genuine Vermont coppers, counterfeit George III half pennies and quasi legitimate Connecticut and New Jersey coppers.

John Bailey and Ephraim Brasher partnered to form a mint near New York City. They petitioned the State of New York for the right to produce copper coins for the Empire State but never obtained an official franchise. Nevertheless they produced the Excelsior and Nova Eborac pieces which had semiofficial status. Brasher is best known for the Brasher gold Doubloon which is now one of the most desired and most expensive early American rarities. His Nova Eborac coppers are considerably more collectable, and some of the letter punches that were used to make the dies for those copper pieces were also used for the Brasher Doubloon dies.

Finally there were many counterfeit copper coins which came from various sources. These were collectively called "Bung town coppers," and were almost always light weight counterfeits of the British half penny. These pieces, which were made to look worn from the day they were made, had an odd looking head on one side and a seated figure on the other. The words on these pieces were sometimes misspelled or gibberish. The idea was NOT to duplicate the genuine coins to avoid a counterfeiting charge, at least in the strictest sense.

The glut of copper coins in circulation in the 1780s finally caused their value to collapse. There were simply too many of them. The Confederation Government attempted to fix the problem by authorizing the production of the Fugio Cents, but that effort failed when it was found that those coins were also too light to be traded at the desired rate of 100 pieces to the Spanish Milled dollar.

So far gold and silver coinage was concerned, most of the coins that circulated in America were Spanish (by a wide margin), British and French in that order. The coinage of other European nations circulated in The United States as well. Just about any gold or silver coin that looked credible had a chance of gaining acceptance.

After the first U.S. Mint opened in Philadelphia in 1792, the situation did not change markedly. The capacity of the first mint was inadequate to serve the nation's needs. In addition the attempt to establish the bimetallic monetary system (the coinage of gold and silver coins circulating side by side at a fixed ratio between the two medals, e.g. 15 or 16 parts of silver = 1 part of gold) only resulted in driving either gold or silver coinage out of circulation at one time or another.

There were issues with each of the coins that the Philadelphia Mint issued that prevented full public acceptance. The half cent was looked down upon as "a poor man's coin," and merchants did not like them because the coin cut into their profits. Citizens viewed the large cent as heavy and inconvenient to use. The big cents saw very little circulation outside of the major cities. Half dimes, dimes and quarters were not issued consistently and were short supply. Those who deposited silver at the first mint often demanded the largest silver coin available which was the silver dollar in the early years and the half dollar after the dollar coinage was suspended. Half dollars were mostly held by banks to back their currencies, and did not see a lot of circulation. President Thomas Jefferson halted the coinage of silver dollars and $10 gold pieces in 1804 in an attempt to prevent the flow of gold and silver out of the country. In any case the intrinsic value of the early gold coins prevented their wide spread use because their gold content exceeded their face value. Many U.S. early gold coins were exported to Europe and melted.

So what did circulate in America before the Civil War? The answer is foreign coins from Europe and, much more often, their Mexican and South American colonies. Later, as those nations won their independence from their European masters, their coins circulated extensively in the U.S. The U.S. Government recognized the importance of these coins to the U.S. economy by providing them legal tender status. That legal tender status would not be repealed until 1857.

In addition to foreign coins, state charted banks issued paper money in large quantities. The bank note currency was only as good as the institution that issued it. Currency that was issued from a local bank that had a sound financial reputation might trade for 90 to 100 % of its face value. Money issued by a non-local bank or a bank whose reputation was shaky was accepted at a discount or not at all. Fortunately most early to mid 19th century Americans seldom ventured more than five or ten miles from their home during their entire lives. As a result most Americans were not overly concerned about "traveling money." Although most banks made an effort to be financially sound, a few were fraudulent concerns that issued paper money without even opening their doors. The term "wild cat bank" was popular because it was said that for some banks, one needed to be a wild animal to find the redemption center.

This $2 note was issued by a failed bank that was in Milford, Delaware.

It is not hard to see that such a haphazard monetary system was not conducive to fostering a robust national economy. Reform was needed, and it came during what some might think was an unusual time, the Civil War. On February 25, 1863 Abraham Lincoln signed the National Currency Act. That bill provided for the establishment of National Banks, which were authorized to issue U.S. Government currency with the issuing bank's name on it. The banks were permitted to issue currency equal in value of up to 90% of the worth of Government bonds that the bank deposited with U.S. Treasury.

This legislation achieved two objectives. First, it provided funding for the Union to conduct the Civil War and supported a broader market for Union bonds. Second, it brought a much higher level of order to the nation's monetary system, which had been flooded with state bank notes. The term "broken bank notes" is often applied to these pieces of paper money, and in a sense that was not too far off the mark. National Bank notes, which were backed by U.S. Government securities, were far more dependable than state bank notes that had only the support of one private institution.

In 1865 the circle was completed when the U.S. Government levied a 10% tax on privately issued bank notes, which essentially ended the practice of issuing them. Although the phrase "The ability to tax carries with it the ability to destroy," is true enough, in this case the tax on privately issued bank notes worked for the benefit of the public.

After the Civil War, the national monetary system became far more standardized . In December 1878, the government was in the position to redeem its paper money in gold which restored public confidence in the monetary system. This long sought achievement ushered in the beginning of the modern monetary era in America.

LOVE IT.!.! Thanks for sharing

ricko

@BillJones.....Thank you for this very informative and excellent treatise on our early money. Cheers, RickO

Jimnight

@BillJones
Excellent read. What did I learn that I didn't understand before reading your post? How did the term " Union " come into being.

53BKid

BillJones: A very good read. Thank you.

All: Consider the requirements for the Coin Collecting Merit Badge for Boy Scouts. Become a Merit Badge Counselor and work with teens to become new YN's!

https://meritbadge.org/wiki/index.php/Coin_Collecting

Coin Collecting merit badge requirements

Understand how coins are made, and where the active U.S. Mint facilities are located.
Explain these collecting terms:
a. Obverse
b. Reverse
c. Reeding
d. Clad
e. Type set
f. Date set
Explain the grading terms Uncirculated, Extremely Fine, Very Fine, Fine, Very Good, Good, and Poor. Show five different grade examples of the same coin type. Explain the term proof and why it is not a grade. Tell what encapsulated coins are.
Know three different ways to store a collection, and describe the benefits, drawbacks, and expenses of each method. Pick one to use when completing requirements.
Do ONE of the following:
a. Demonstrate to your counselor that you know how to use two U.S. or world coin reference catalogs.
b. Read a numismatic magazine or newspaper and tell your counselor about what you learned.
Describe the 1999–2008 50 State Quarters® program or the America the Beautiful Quarters® program. Collect and show your counselor five different quarters from circulation you have acquired from one of these programs.
Collect from circulation a set of currently circulating U.S. coins. Include one coin of each denomination (cent, nickel, dime, quarter, half-dollar, dollar). For each coin, locate the mint marks, if any, and the designer’s initials, if any.
Do the following:
a. Identify the people depicted on the following denominations of current U.S. paper money: $1, $2, $5, $10, $20, $50, and $100.
b. Explain “legal tender.”
c. Describe the role the Federal Reserve System plays in the distribution of currency.
Do ONE of the following:
a. Collect and identify 50 foreign coins from at least 10 different countries.
b. Collect and identify 20 bank notes from at least five different countries.
c. Collect and identify 15 different tokens or medals.
d. For each year since the year of your birth, collect a date set of a single type of coin.
Do ONE of the following:
a. Tour a U.S. Mint facility, the Bureau of Engraving and Printing, or a Federal Reserve bank, and describe what you learned to your counselor.
b. With your parent’s permission, attend a coin show or coin club meeting, or view the Web site of the U.S. Mint or a coin dealer, and report what you learned.
c. Give a talk about coin collecting to your troop or class at school.
d. Do drawings of five Colonial-era U.S. coins.

ElKevvo

Good stuff..thanks for posting it!

K

OldIndianNutKase

Very interesting history that is worth preservation Bill. Your efforts are very appreciated.

OINK

DoubleEagle59

So they printed too many of these and they were worthless................

Just like these.......but somehow today they are considered the world's finest currency.

My my, how times have changed!!