What Is a Greenback?
A greenback is a slang term for U.S. dollars, originating from the mid-1860s when these paper notes were printed in green ink. Congress, with limited taxing authority, used this means to help finance the Civil War.
Initially, ‘greenback’ carried negative connotations as these notes lacked secure financial backing, making banks hesitant to honor them at full value.
Key Takeaways
- Greenback is slang for U.S. dollars.
- They were first introduced to fund the Civil War and were named for their distinctive green ink backs.
- The lack of gold backing led to inflation and a devaluation of greenbacks.
- Early greenbacks were demand notes, later replaced by notes authorized by the Legal Tender Act of 1862.
The Emergence of Greenbacks
By the early 1800s, the U.S. embarked on another paper money experiment. Despite circulating bank notes, over-issued by banks, the government created over $400 million in legal tender to finance the Civil War. Prior bonds had depleted finances, and the new notes entered the economy amidst strong opposition from bankers wary of federal overreach and potential bankruptcy from a failed war. Secure only by health of individual issuers, the greenbacks were colloquially rooted in their green backs and endorsed by promises, not gold.
Demand Notes vs. Paper Notes
There were two types of greenbacks: demand notes and paper notes. Demand notes, introduced in 1861 and 1862, covered salaries and other expenses during the Civil War. The Legal Tender Act of 1862 ushered in paper notes, becoming U.S. official currency as demand notes phased out.
Fluctuating with war tides, the value of greenbacks, influenced by Civil War events, peaked when North succeeded but faced depreciation otherwise. H. W. Brand’s book mentions its critical depreciation in 1864, before stabilizing after the war.
Banks could refuse payment in demand notes and variations in their acceptance showed during the economy’s pressured times. Though funding significantly, greenbacks’ value increment added to inflation woes, culminating in doubled daily costs by the mid-1860s.
Related Terms: currency, legal tender, inflation, bankruptcy.
References
- Economic History Association. “Money in the American Colonies”.
- American Numismatic Society. “A History of American Currency”.
- Geneva Historical Society. “Currency, Finance, and the Civil War”.
- United States Department of the Treasury Bureau of Engraving and Printing. “BEP History Fact Sheet”.
- Queen’s University. “Greenback/Gold Returns and Expectations of Resumption 1862-1879”, Page 1.
- H.W. Brands. “Greenback Planet: How the Dollar Conquered the World and Threatened Civilization as We Know It”, Page 13. University of Texas Press, 2011.
- Museum of American Finance. “Greenback”.
