Banknote

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Large-denomination banknotes of the world

two sides of 100 Old Israeli shekel 1980

 

 

A banknote (often known as a bill, paper money or simply a note) is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. Along with coins, banknotes make up the cash or bearer forms of all modern fiat money. With the exception of non-circulating high-value or precious metal commemorative issues, coins are used for lower valued monetary units, while banknotes are used for higher values.

The banknote was first developed in China during the Tang and Song dynasties, starting in the 7th century. Its roots were in merchant receipts of deposit during the Tang Dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage in large commercial transactions.^[1][2][3] During the Yuan Dynasty, banknotes were adopted by the Mongol Empire. In Europe, the concept of banknotes was first introduced during the 14th century, with proper banknotes appearing in the 17th century.

 

Paper currency was first developed in China in the Tang Dynasty during the 7th century, and was later introduced in the Mongol Empire, Europe, and America. Paper money originated in two forms: drafts, which are receipts for value held on account, and "bills", which were issued with a promise to convert at a later date.

The perception of banknotes as money has evolved over time. Originally, money was based on precious metals. Banknotes were seen as essentially an I.O.U. or promissory note: a promise to pay someone in precious metal on presentation (see representative money). With the gradual removal of precious metals from the monetary system, banknotes evolved to represent credit money, or (if backed by the credit of a government) also fiat money.

Notes or bills were often referred to in 18th century novels and were often a key part of the plot such as a "note drawn by Lord X for £100 which becomes due in 3 months' time".

 

Money is based on the coming to pre-eminence of some commodity as payment. The oldest monetary basis was for agricultural capital: cattle and grain. In Ancient Mesopotamia, drafts were issued against stored grain as a unit of account. A "drachma" was a weight of grain. Japan's feudal system was based on rice per year – koku.

At the same time, legal codes enforced the payment for injury in a standardized form, usually in precious metals. The development of money then comes from the role of agricultural capital and precious metals having a privileged place in the economy.

Such drafts were used for giro systems of banking as early as Ptolemaic Egypt in the 1st century BC.

 

In the early 1690s, the Massachusetts Bay Colony was the first of the Thirteen Colonies to issue permanently circulating banknotes. The use of fixed denominations and printed banknotes came into use in the 18th century.

The Confederate Congress met in Montgomery, Alabama on March 9, 1861 and authorized the issuing of paper currency (in the form of interest-bearing notes). Such notes were originally printed by the National Bank Note Co.^[9]

In the early 18th century each of the thirteen colonies issued their own banknotes. During the American Revolutionary War, the Continental Congress issued Continental currency to finance the war. The federal government of the United States did not print banknotes until 1862. However, almost immediately after adoption of the United States Constitution in 1789, the United States Congress chartered the First Bank of the United States and authorized it to issue banknotes. The bank served as quasi-central bank of the United States. The bank closed in 1811 when Congress failed to renew its charter. In 1816, Congress chartered the Second Bank of the United States. When its charter expired in 1836, the bank continued to operate under a charter granted by the Commonwealth of Pennsylvania until 1841.

In the United States, public acceptance of banknotes in replacement of precious metals was hastened in part by Executive Order 6102 in 1933. This order carried the threat of a maximum $10,000 fine and a maximum of ten years in prison for anyone who kept more than $100 of gold in preference to banknotes.

 

Generally, a central bank or treasury is solely responsible within a state or currency union for the issue of banknotes. However, this is not always the case, and historically the paper currency of countries was often handled entirely by private banks. Thus, many different banks or institutions may have issued banknotes in a given country. In the United States, commercial banks were authorized to issue banknotes from 1863 to 1935. In the last of these series, the issuing bank would stamp its name and promise to pay, along with the signatures of its president and cashier on a preprinted note. By this time, the notes were standardized in appearance and not too different from the Federal Reserve Notes that circulated for most of the 20th century.

In a small number of countries, private banknote issue continues to this day. For example, by virtue of the complex constitutional setup in the United Kingdom, certain commercial banks in two of the union's four constituent countries (Scotland and Northern Ireland) continue to print their own banknotes for domestic circulation, even though they are not fiat money or declared in law as legal tender anywhere. The UK's central bank, the Bank of England, prints notes which are legal tender in England and Wales; these notes are also usable as money (but not legal tender) in the rest of the UK (see Banknotes of the pound sterling).

In Hong Kong, three commercial banks are licenced to issue Hong Kong dollar notes.^[10] As well as commercial issuers, other organizations may have note-issuing powers; for example, until 2002 the Singapore dollar was issued by the Board of Commissioners of Currency Singapore, a government agency which was later taken over by the Monetary Authority of Singapore.^[10]

$1 Silver Certificates, 1935 and 1957

  Most 1935 and 1957 series Silver Certificates are worth a very small premium
  over face value. Circulated examples typically sell for $1.25 to $1.50 each,
  while Uncirculated $1 Silver Certificates are worth between $2 and $4 each.
  Exceptions to these values include Star notes (where the serial number is
  followed by a small star in place of the suffix letter), and other various
  varieties and blocks including 1935A Hawaii and North Africa notes,
  Experimental notes, and various rare blocks and serial number ranges. Please
  refer to the Standard Guide to Small Size U.S. Paper Money (1928 to date), by
  Dean Oakes and John Schwartz, for more information.

$5 and $10 Silver Certificates, 1934 and 1953

  As with most $1 Silver Certificates, most circulated $5 and $10 Silver
  Certificates only carry a small premium over face value, ranging from 10% to
  30%. Uncirculated $5 and $10 Silver Certificates carry a larger premium,
  depending on the issue and the grade. There are several significantly scarcer
  and even rare varieties in these series, however, including the 1933 $10
  Silver Certificate, the 1953-B $5 Silver Certificate Star Note, and others,
  and most Star notes from these series carry some premium (ranging from small
  to large) over the regular notes. Again, please refer to the Standard Guide
  to Small Size U.S. Paper Money (1928 to date), by Dean Oakes and John
  Schwartz, for more information.

$1, $2, $5, and $100 Red Seals, 1928, 1953, 1963, and 1966

  Although some of these notes carry more of a premium than others, most $2 and
  $5 Red Seals that are seen are circulated notes from common series that carry
  very little premium over face value. All $1 Red Seals are scarce and are
  quite valuable in higher grades, while $100 Red Seals (although relatively
  modern) carry a premium of 20% to 40% even in circulated condition. Again,
  there are several scarce issues among these notes, and we recommend the
  Standard Guide to Small Size U.S. Paper Money (1928 to date), by Dean Oakes
  and John Schwartz, for more information.

$2 Federal Reserve Notes

  Most $2 Federal Reserve Notes from 1976 and 1995 are worth no more than face
  value. Original packs from the Bureau of Engraving and Printing carry a
  premium, as do Star Notes which typically sell for $10 to $20 in Uncirculated
  condition for the common district banks. Star Notes from the Kansas City and
  Minneapolis district banks (I-* and J-* notes) are very scarce, and sell for
  more than $100 in Uncirculated condition.

"Old" Federal Reserve Notes, 1928, 1934, 1950,
  1963, etc.

  Most circulated Federal Reserve Notes from more modern series are worth no
  more than face value. Some of the early series notes (1928 and 1934) do carry
  a small premium, although for circulated notes this premium is small, usually
  10% to 30%. Premiums are higher as a percentage of face value for lower
  denomination notes, such as $5 and $10 bills, as opposed to the higher
  denomination $20s, $50s, and $100s. Uncirculated notes and Star Notes of some
  of the earlier series do carry a large collector premium in some cases, and
  we highly recommend the standard reference book in this field, the Standard
  Guide to Small Size U.S. Paper Money (1928 to date), by Dean Oakes and John
  Schwartz, for more information.
 

$500, $1,000, $5,000, and $10,000 Federal Reserve Notes

  Most $500 and $1,000 bills are quite common, and are typically worth only a
  small premium over face value. Circulated 1934 series notes are usually worth
  from $500 to $800 for the $500s and from $1,000 to $1,400 for the $1,000s,
  depending on condition. The 1928 series usually carries an extra 10% to 20%
  premium. Uncirculated $500 and $1,000 bills are quite desirable, although
  they are usually worth no more than twice face value. All Star Note high
  denomination bills are very rare, and $5,000 and $10,000 bills are worth much
  more than face value unless they are damaged, and we would suggest
  consultation with one of our currency experts if you possess one of these
  notes.

 

  As an aside, it is interesting how poorly high denomination notes have
  performed as an investment. Anyone would have fared much, much better by
  depositing the $500 or $1,000 in even a low-interest savings account in the 1940's
  or 1950's when these circulated, as the return would have been much higher
  than on a $500 or $1,000 bill. In fact, the return on $5,000 and $10,000
  bills is very poor compared to other investments-yes, even the stock market,
  where despite the bear market of the last couple of years, $5,000 or $10,000
  invested in stocks when these notes were printed would be worth many
  multiples of what these notes are now worth. The moral is, of course, that if
  you are "hanging on" to high denomination notes in the hopes that
  they are a good investment and will be worth much more one day, history is
  not encouraging.

Gold Certificates

  1928 Gold Certificate $10, $20, $50, $100, $500, and $1,000 bills are all
  legal to own, and all are highly collectible. The $10 and $20 notes are
  typically worth from twice face value to $100 or more depending on condition,
  while the $50 and $100 notes are more valuable. $500 and $1,000 Gold
  Certificates are scarce and we recommend consultation with one of our
  currency experts if you possess one of these notes.

"National Currency"-National Bank Notes or
  Federal Reserve Bank Notes

  The difference between 1929 series National Bank Notes and Federal Reserve
  Bank Notes is rather subtle, as each is called "National Currency"
  above the portrait and each bears a brown Treasury seal, but they can easily
  be distinguished by the bank name to the left of the portrait. If it is from
  a bank entitled "The Federal Reserve Bank of…" and is from one of
  the 12 District Federal Reserve Banks, it is a Federal Reserve Bank Note.
  National Bank Notes are from other banks with titles such as "The First
  National Bank of…" or the "National Bank of…" or the
  "National Trust and Savings Bank of…" or other such titles.

 

  Most Federal Reserve Bank Notes are common, although all notes issued from
  the Dallas bank are rare and some from other district banks are scarce. All
  Star Note Federal Reserve Bank Notes are scarce. The Standard Guide to Small
  Size U.S. Paper Money (1928 to date), by Dean Oakes and John Schwartz, is
  recommended for more information.

 

  Most National Bank Notes are relatively inexpensive, although the range in
  value is quite large. The definition of "common" may also not be
  typical with National Bank Notes, as a note from a bank with only a couple of
  dozen notes known may be considered "common." This is because,
  while there only may be a limited number of notes known from a specific bank,
  more than 14,000 National Banks were chartered to issue these notes, and no
  single collector can reasonably hope to own them all. As such, most
  collectors specialize in a single state, city, or even bank. As a result,
  there may only be a small number of collectors interested in notes from a
  particular bank, so supply and demand is the overriding factor in value. A
  note from a bank with as few as five or six notes known may only be worth a
  small amount of money if only two or three interested collectors are in the
  market for such a note. The standard reference book to National Bank Notes,
  by Don C. Kelly, is a must for research on this series of notes.

Large Size (pre 1928) "Horseblanket" or
  "Saddleblanket" Notes

  All U.S. currency made prior to 1928 is of a larger size than modern
  "small size" bills, hence the nicknames "Horseblanket" or
  "Saddleblanket." There were many different series and types of
  notes printed prior to 1928 by the Federal government, and values range from
  the very common 1923 $1 Silver Certificates (blue seals), worth from $10 to
  $100 depending on condition, to ultra-rarities that can be worth tens of
  thousands of dollars or more. If you come into possession of any "large
  size" bills, we suggest that you consult one of our currency experts
  here at CAA-Heritage to help you make a determination of value.

1862 Legal Tender $1

  The cost of the Civil War was huge in dollars and lives. To finance the war
  both North and South turned to paper currency issues. The Union issued $1 and
  $2 currency notes beginning in 1862. A second issue of 1862-63 added $5, $10,
  $20, $50 and $100 notes. Unlike the contemporary Confederate issues, the
  Union notes were printed in smaller numbers with better specie backing. As
  the war progressed the notes traded at only a percentage of their stated
  values; but they also traded at a major premium to Confederate notes. Today
  Union notes are much rarer than most Confederate issues. The $1 note is the
  most common. Depending on condition these notes usually sell for between $100
  and $1000.

1923 Silver $1

  Silver Certificates were issued beginning in 1880 and were redeemable at the
  Treasury in silver. Initially this silver would have been from the rich
  Comstock Lode discovered in Nevada in the 1870s. 1923 was the last series in
  which Silver Certificates were issued in the large-sized format that dated
  back to the first notes of the 1860s. In 1928 new, smaller notes would be
  issued. Today 1923 $1 Silver Certificates are generally worth between $20 and
  $150 depending on condition.

1899 Silver $1

  The 1899 Silver Certificate is a perennial favorite among collectors; its
  bold design and relative availability make it a logical choice for inclusion
  in many collections of silver certificates. These notes were part of the
  government effort to make use of the vast silver deposits of the western
  United States. Today most are worth between $40 and $250 depending on
  condition.

1917 Legal $1

  These notes are a continuation of the act of 1863 that provided for a paper
  currency issue by the United States government during the Civil War. Though
  not specifically redeemable in specie these notes carry text stating that
  they are acceptable at par by the government as payment. The early 20th
  century was a time of reflection on the past by Americans as evidenced by the
  celebrations of Columbus in 1893, Jamestown in 1907 and Plymouth in 1920.
  This note's engraving of the landing of Columbus is therefore unsurprising.
  These popular notes are generally worth between $40 and $150 depending on
  condition. Superlative examples are of course worth more.

1907 Legal $5

  A later example of the popular “Woodchopper” notes. The central motif of a
  pioneer farmer with dog and family has long captivated collectors. Today
  these notes, while reasonably common, command good prices. Depending on
  condition most are worth between $80 and $200.

Confederate Currency

  All genuine Confederate currency has some collector value, although most of
  the 1864 issue notes are very common (an exception being the $500 note, which
  is common but popular and is worth from $200 to $400 depending on condition).
  Earlier issues range from common to rare. All issues from 1861 in Montgomery
  are very valuable, and we suggest consultation with one of our currency
  experts if you have such a note. Replicas of Confederate currency are quite
  common, and are often printed on crisp, brown paper that appears antique.
  Genuine notes are hand-signed and numbered, and the replicas appear to be
  hand-signed and numbered as well, although close inspection will easily
  determine that the signatures on replicas are printed in the same ink as on
  the rest of the bill. Contemporary counterfeits made to circulate at the time
  of issue have collector value ranging from $10 to $100 or more depending on
  condition and the specific circumstances of issue.

1840 $1,000 Bank of the United States

  Any note with the serial number 8894 is a replica that was made in the 1960's
  for a promotional giveaway in cereal boxes. These replicas are essentially
  worthless. These replicas are made from yellowish-brown "antiqued"
  paper that is crisp and brittle to the touch. The genuine $1,000 Bank of the
  United States notes are printed on thin banknote paper that was originally
  white or cream colored. One supposes that if a genuine note with the serial
  number 8894 ever were to show up that it is likely to cause quite a stir
  among dealers and collectors who have grown weary of answering questions
  regarding this particular replica.