The greenback issues were started in 1861 and continued throughout the war. The government suspended specie payments in 1862 and the greenbacks depreciated until, in 1864, they brought less than 40 cents on the dollar in gold. The fluctuations in value were wide and frequent, varying with the fortunes of war and the markets.

Contraction was undertaken at the conclusion of the war, but abandoned in 1868. In 1879 specie payments, according to the pledge of the Specie Resumption Act of 1875, were resumed, the Secretary of the Treasury having accumulated a specie reserve of about $100,000,000 for this purpose. The sum of greenbacks left in circulation was $346,681,016, and it became the accepted idea that the government would retain a reserve of $100,000,000 in gold for their redemption. This reserve proved sufficient until the redemptions during the depression that followed the panic of 1893, when an endless chain of redemptions and reissues threatened to extinguish the reserve; the balance of trade was adverse and holders of greenbacks presented them for gold to ship abroad, but because of deficits the Treasury was forced to reissue the redeemed notes to meet its ordinary expenses. To replenish the reserve, the Treasury sold bonds for gold.

In 1900 a separate reserve fund of $150,000,000 was authorized and adequate powers were extended to the Secretary of the Treasury for maintaining it; the fund was to be separated from the general Treasury funds; the greenbacks when redeemed were not to be reissued until the fund was again replete; the Treasury was to pay any gold in its possession into this fund to refill it, and was also empowered to sell bonds to fill the reserve when it should drop below $100,000,000. By the Federal Reserve Act in 1913 the government's share of the net earnings of the federal reserve banks may, at the discretion of the Secretary of the Treasury, be used to supplement the $150,000,000 reserve.

These greenbacks are promises of the United States to pay on demand. Between 1862 and 1879 this promise was not kept and the notes possessed all the features of inconvertible paper; but since 1879 they have been convertible and at par. They are now legal tender for payment of all debts, public and private, except for payment of interest on government debt and for payment of revenue duties. The denominations issued are 1,000's, 500's, 100's, 50's, 20's, 10's, 5's, 2's, and i's. As a constituent of our money system they are a menace, are an inelastic form of currency, and should be redeemed and discarded. Their menace becomes less as they come to constitute a smaller fraction of our total circulating media, as they become bills of smaller denominations, and as the reserve becomes larger - all of which tendencies are now at work.