peashooter85:The History of the Paper Coin —- Fractional Currency during the Civil War.During the US

peashooter85:The History of the Paper Coin —- Fractional Currency during the Civil War.During the US Civil War the value of precious metals skyrocketed as demand for gold and silver increased.  Like all times of crises investors, businessman, and everyday people began to hoard hard currency, stocking up on precious metals and other valuable commodities. This caused a problem for the nation’s supply of small change, since back then dimes, quarters, and fifty cent pieces were made out of silver.What resulted was a sudden shortage of pocket change.  Ever resourceful during times of war, American citizens turned to a new source for money; postage stamps.  While today the US Postal Service may not be deemed all that important for our everyday communications, in the 19th century the Postal Service was one of the few practical ways to send messages across the country. Thus postage stamps often had real value, making an excellent form of currency.The Secretary of the Treasury Salmon P. Chase took note of people using postage stamps for money during the coin shortage.  In 1862 Chase authorized the printing of new fractional currency notes to take the place of coins.  Inspired by the people’s use of stamps for money, the new notes were backed in value by postage stamps, meaning the bearer of a note could exchange it for stamps at any bank or post offices.  Back then there was little concept of such a thing as fiat currency, and money had to be backed by something (later in the Civil War the treasury produced the United States Note, Americas first foray into fiat currency).  Since stamps were considered valuable and often traded for currency, it was decided to base the value of fractional currency on the value of stamps.  Originally the first issues of the notes actually did look like postage stamps, with perforated edges that where sold in sheets and books like stamps.  Thus they were often called “postage stamp currency” (top picture).  However all subsequent issues were made like regular paper money in the form of bills.  Denominations were issued for 3, 5, 10, 15, 25, and 50 cents.When the Civil War ended in 1865 so too did the shortage of precious metals and the shortage of coins.  However fractional money became so popular that printing and issuance of the notes continued well after the war and the metals shortage.  Fractional Currency notes continued to be produced until 1876.  -- source link
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