Paper Money Questions- Here is Answer on US Silver & Gold Coin Notes

SILVER CERTIFICATES BACKGROUND

Silver Certificates were printed for a time in the United States as a form of paper currency. They were produced in response to silver agitation by citizens who were angered by the Fourth Coinage Act, which placed the United States on the gold standard. The certificate was matched to the same amount of value in silver coinage. For example, one fifty dollar Silver Certificate equals fifty silver dollars.
There are a few features that distinguish a Silver Certificate. The seal and serial numbers on many of the first Silver Certificates issued were red, brown, and blue. It was not until Series 1899 for the $1, $2, and $5 denominations that the seal and number colors were officially and permanently changed to blue. (This occurred at different points for denominations above $5). During World War II the government issued 1935a Silver Certificates with a brown seal for Hawaii distribution and 1935a certificates with a yellow seal for North Africa distribution. The idea was that if these areas fell into enemy hands during the war, the money would be able to be easily identified and cancelled so as to prevent large monetary losses.
The obligation of a certificate states how much of a specific commodity the government of a country will "pay to the bearer." On most large-size Silver Certificates, the obligation reads: "This certifies that there have/has been deposited in the Treasury of the United States of America (number) silver dollar(s) payable to the bearer on demand." On small-sized Silver Certificates beginning with Series 1934, in order to denote current location of deposit, it was changed to read: "This certifies that there is on deposit in the Treasury of the United States of America (number) dollar(s) in silver payable to the bearer on demand."
The "Coinage Act of 1873" placed the United States on the gold standard, which replaced the bimetallic (silver and gold) standard that had been created by Alexander Hamilton. Many of the poorer citizens saw this as a "crime," and silver agitation began. The Bland-Allison Act, as it came to be known, was passed by Congress on February 28, 1878. It did not provide for the "free and unlimited coinage of silver" demanded by Western miners, but it did require the United States Treasury to purchase between $2 million and $4 million of silver bullion from mining companies in the West. The silver coins that were to be minted would be legal tender for all debts, like gold. These coins, however, were quite heavy, so the government applied their gold certificate strategy to the silver. Suppose that there were five silver dollars in the treasury. The government would print a $5 Silver Certificate against the dollars, providing a somewhat easier medium of exchange. The idea was kept, and Series 1878 was printed in denominations of $10 to $1000.
Certificates circulated, mainly in the $1 denomination, widely throughout the United States in the years following 1934. When the '34s wore out, they were replaced with a new, more modern-looking Series 1953 (1935 for the $1 silvers; see below), with the same face changes as the Series 1950 Federal Reserve Notes had experienced. However, the Silver Certificates began to disappear from circulation during the 1940s and 1950s. The amount of Silver Certificates in circulation depended directly upon the amount of silver bullion in the Treasury vaults. As people redeemed the certificates for bullion or silver dollars, the notes were shredded, because the notes had lost their backing and could not be recirculated unless there was more silver being produced. The price of silver was also rising. In 1960, it was nearing $1.29, which meant that silver dollars were worth more than $1. This meant that people would receive their silver dollars, and melt them down for the bullion, thereby reducing the amount of silver in circulation, which was already falling.
In March 1964, Secretary of the Treasury C. Douglas Dillon halted redemption of Silver Certificates for Silver Dollars. In the 1970s, large numbers of the remaining silver dollars in the mint vaults were sold to the collecting public for collector value. Silver Certificates were abolished by Congress on June 4, 1963 and all redemption in silver ceased on June 24, 1968. Paper currency is still valid legal tender without the Silver Certificate, instead being backed simply by the strength of the U.S. economy. According to the U.S. treasury, "The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are 'backed' by all the goods and services in the economy.

-GW HUNTER- OUT


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