Something accepted in substitute of metallic money; money founded on credit; a simple promise to pay bearer in coin on demand; a non-interest-bearing note dependent for payment upon the ability of the issuer to meet the same. Treasury Notes of 1890, gold1 and silver certificates, United States Notes, etc., issued in this country, are examples. The annual cost of maintenance of the paper currency issued by the Government averages about two-tenths of one per cent, of the amount outstanding.2
Paper currency of all denominations and kinds outstanding in the United States October 31, 1906, as furnished by the Treasury Department, was $347,681,016, less $1,000,000 unknown, destroyed.
The first paper money issued by the United States Government was authorized by Acts passed in 1861, but this kind of money was first issued in America when attempted by the Colonies (Massachusetts first) as early as 1690. Paper money is said to have been first issued in China about 1,000 years before Christ.1 (See "Convertible Paper Money" and "Inconvertible Money.")
1 Conant declares that these certificates " are not paper money in the usual sense because they represent gold coin of full value, instead of promises to pay which there may not be the ability to fulfil." And he is right, for, as Fiske says, " paper money is not real money and will not continue current when the credit on which it was based is gone."
2 Report of the Secretary of the Treasury for 1905.