People take money for granted. You may have a lot, or you may have none, but it’s out there in the billions. Most major countries have their own forms of money, the Euro notwithstanding—even the 19 nations that have embraced it as their national currency had their own at one point. Remember the French franc, the German deutsche mark, the Italian lira?
For centuries, a nation’s money represented the country, its economy, and its history. But money and the various forms it has taken are full of stories–interesting, and sometimes strange. And U.S. money is no exception.
Here are some things you may not know about U.S. money and its history.
The U.S. Dollar is Based on a Spanish Coin
Before the U.S. had discovered large deposits of gold and silver within its borders, Spanish milled silver dollars were the most commonly used coin in the country. The U.S. dollar was originally pegged to one Spanish 8-real silver coin. We also got our dollar sign from the ocho real coin—a figure 8 with two vertical strokes through it that morphed into the current $.
Early Coins Were Often Cut to Pieces
The 8-real coins could be easily cut into eight parts, giving them the common name “pieces of eight.” Those pieces were called “bits” and were equivalent to one-eighth U.S. dollar, hence two bits equaled a quarter dollar. Now you know where the expression came from.
Paper Money is Old, But U.S. Paper Dollars Are Relatively New
Paper money has been around for hundreds of years, but the U.S. Constitution only authorizes the production of coins. Paper money is not addressed, perhaps because pre-revolutionary paper Continental dollars lost their value to hyperinflation, eventually becoming nearly worthless. Gold and silver held their value, so the Founding Fathers stuck with it.
Foreign Coins Remained Legal in the U.S. Until 1857
The U.S. Mint didn’t begin producing coins until 1792, so commerce relied exclusively on foreign money until then, primarily the Spanish real. Since so much foreign currency was in circulation, it remained in use for many years. In fact, as late as 1830, about 25% of circulating coins in the U.S. were of Spanish origin. By the early 1850s, the Mint was able to meet the country’s demand for coins, and the Coinage Act of 1857 ended foreign coins as legal tender, requiring it to be converted to U.S. money.
Banks and Merchants Once Printed Their Own Money
Coin shortages were common in the country’s early days, so state-chartered banks often printed paper money that could be exchanged for gold or silver. The practice even extended to businesses that printed scrip that could be redeemed for merchandise at their stores. At one point, over 8,000 entities were printing their own money, creating confusion and lending to rampant counterfeiting. The 1857 banking act put it to a halt.
Congress Must Approve All Money Designs
Because it represents the nation, Congress must approve the design of our money. Paper money can be redesigned frequently, but coin designs can only be changed every 25 years without special legislation by Congress. The coin’s contents must also be approved, and that has led to some interesting controversy, lobbying and political maneuvering over the years.
Our Money Has a Short Life Expectancy
While it’s engineered to stand up to rough handling, paper money isn’t expected to survive very long. Of the six denominations in common circulation today (sorry $2 bill), $50 and $100 bills are, on average, the longest lasting, staying in circulation as long as 18 years. Twenties last around four years, tens for three years, and fives are worn out after two years, on average. Singles only last around 18 months. With about 18 billion ones in circulation, the money factories keep humming to replace them.
