From the standpoint of origin or source of issue the most important kinds of paper money may be grouped under two heads, government currency and bank currency. At the present time banks issue much the larger proportion, but government currency is still common, and it has played so important a role in the political and economic history of modern times, as well as in the history of economic science, that an understanding of its peculiar characteristics is very important, and its study most instructive.

Two varieties of government currency must be distinguished, known respectively as convertible and inconvertible notes. By the former are meant promises of the government to pay on demand, and by the latter promises to pay at some indefinite and undetermined date in the future. Both varieties are usually issued in fixed and convenient denominations, and made legal-tender in the payment of all debts public and private; though the latter quality is not universally or necessarily attached to convertible notes. The government promise may be clearly expressed in the statement written or printed on the note, or it may be found only in the statutes by which the issue is authorized. In spite of external similarities, the two varieties are subject to different laws and must be separately considered.