The paper money of the United States consists of gold certificates, silver certificates, United States notes, and Treasury notes, issued by the Government; national bank notes issued by the national banks; reserve bank notes issued by the Federal reserve banks; and Federal reserve notes issued to the Federal reserve banks under authority of the Federal Reserve Board.

The gold certificates, amounting on June 1, 1914, to $1,105,753,619, are paper certificates issued against gold coin or bullion held in trust in the Treasury. They are virtually warehouse receipts for gold stored in the Treasury, and the holders may at any time claim the coin. They are issued to save the wear and tear and the inconvenience incident to the handling of the actual coin. Gold certificates were first authorized in 1863 in denominations of $20 only, and were made receivable for duties on imports. In order to facilitate the resumption of specie payments, their issue was suspended in 1878, but again authorized in 1882. This latter act provided that the issue of gold certificates should be suspended whenever the stock of gold in the Treasury fell below $100,000,000. Their issue was again suspended in 1893 when the Treasury gold reserve was being depleted, but once more authorized in 1900. The gold standard law enacted in that year reaffirmed the provision that the issue of gold certificates should be suspended when the gold reserve in the Treasury should fall below $100,000,000, and further provided that the Secretary of the Treasury may suspend such issue whenever the total amount of United States notes and silver certificates in the general fund of the Treasury shall exceed $60,000,000. Prior to 1907 the smallest denomination of gold certificates was $20, but in that year Congress authorized the issue of $10 certificates. Gold certificates are not legal tender, but they are receivable for customs, taxes and public dues, and national banks may count them as part of their money reserve.

Silver certificates were first issued in 1878 under the terms of the Bland-Allison Act, in exchange for silver dollars deposited in the Treasury or coined under that act. They were first issued in denominations of $10 and upward, but in 1886 the $1, $2, and $5 denominations were authorized. The gold standard act of 1900 provided that silver certificates should be limited to the denominations of $10 and less, except that 10 per cent of the total volume might be issued in denominations of $20, $50 and $100. Silver certificates are not legal tender, but like gold certificates they are receivable for customs, taxes and public dues, and they may be counted in the reserve of national banks. Theoretically neither silver certificates nor silver dollars are redeemable in gold, but in practice they are both exchangeable with gold.

The total amount of treasury notes issued under the Sherman Act of 1890 to pay for silver bullion was $155,931,002. They were issued in denominations ranging from $1 up to $1,000. These notes differed from silver certificates in that they were redeemable in either gold or silver coin at the discretion of the Secretary of the Treasury. The act of 1900 provided that they should be cancelled and retired to an amount equal to the coinage of silver dollars and subsidiary silver from the bullion purchased with these notes. The bullion thus purchased has all been coined and now as the treasury notes are turned in for redemption, silver certificates are substituted for them. There is now only about $2,460,000 of these treasury notes outstanding, so it may be said that they have practically disappeared from circulation.

United States notes were first issued in 1862 to provide the Treasury with funds to meet the enormous expenses of the Civil War, and before that struggle was over the issue of this form of money reached the vast total of $450,000,000. The notes were made legal tender for the payment of all debts, public and private, except customs duties and interest on the public debt. With the resumption of specie payments in 1879, United States notes became acceptable in payment of duties on imports and have been freely received on that account ever since, though the law has not been changed. During the war their value in gold depreciated greatly, causing confusion and loss to the Government and to business, but when specie payments were resumed in 1879 the greenbacks were made redeemable in gold and so returned to a parity with gold. The story of the halting policy of Congress with regard to the retirement of these notes as a result of which the Treasury was brought to the verge of bankruptcy is recited in a previous chapter.1 Largely through the influence of the greenback party the retirement of the United States notes was stopped in 1878 when an act was passed requiring these notes when redeemed to be paid out again and kept in circulation. The total amount of greenbacks outstanding at the time the act of 1878 was passed was $346,681,016 and this amount has remained in circulation ever since. Greenbacks are redeemable in gold and since 1900 a fund of $150,000,000 has been held in the Treasury primarily to meet this obligation. They have been issued in both large and small denominations, but the gold standard act of 1900 provided that when silver certificates of large denominations were cancelled and small ones issued in their place, a like volume of small United States notes should be cancelled and notes of $10 and upwards substituted. This was intended to bring the silver dollars, as represented by silver certificates, into larger use as pocket money. The increased demand for small bills, however, led to the passage in 1907 of an act providing for the issue of United States notes in denominations of $1, $2, and $5 and the cancellation of an equal amount of the higher denominations.

On June 1, 1914, the total amount of national bank notes outstanding was $751,554,696, or about one-fifth of the total money supply of the country. These notes are issued by national banks against government bonds deposited in the Treasury. In denominations they range from $5 up to $1,000. National bank notes issued against two per cent government bonds are subject to a tax of 1/2 of 1 per cent a year. and those issued against other bonds 1 per cent. They are not legal tender, but are receivable for all public dues except duties on imports and may be paid out by the Government for all debts and demands except interest on the public debt and in redemption of the national currency. All national banks are required to receive the notes of other national banks at par.

1 Chapter III (History Of United States Coinage. 18. Adoption Of A Coinage System), Sections 21, 24-27.

As noted in the preceding chapter, the Federal Reserve Act contemplates the gradual retirement of the national bank notes and the substitution therefor of notes issued by the several Federal reserve banks. National banks are not required to retire their circulation, but may do so any time within twenty years after December 23, 1915. Banks desiring to retire their notes will file an application with the Treasurer of the United States to sell their bonds held in trust in the Treasury, and the Federal Reserve Board may require the Federal reserve banks to buy these bonds. It is expected that in this way there will be a gradual shifting of the bonds held by the national banks to the Federal reserve banks and a substitution of Federal reserve notes for national bank notes. The process is likely to be slow, however, so that national bank notes will remain for many years as a part of our currency system.

The Federal reserve notes, the other form of paper money authorized by the Act of 1913, are not bank notes, but obligations of the Government. At the discretion of the Federal Reserve Board they may be issued to any reserve bank upon the deposit of an equal amount of commercial paper and bills discounted by it for member banks. These notes are further protected by a gold reserve of at least 40 per cent of the amount of notes in circulation, and each reserve bank to which they are issued must also maintain in the Treasury a deposit of gold sufficient to redeem them, but not less than 5 per cent. Reserve banks receiving these notes must pay interest on them at a rate to be fixed by the Reserve Board. They are receivable by all reserve banks and member banks, and for all taxes, customs, and other public dues, but they are not legal tender for other purposes.