How the US once had thousands of different types of money : The Indicator from Planet Money In the mid-1800s, the US had 8,370 kinds of money. How that happened, and what it meant for the US economy.
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The Birth Of The Greenback

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The Birth Of The Greenback

The Birth Of The Greenback

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Stacey Vanek Smith, it's Jacob Goldstein...



GOLDSTEIN: ...Co-host of Planet Money, author of "Money: The True Story Of A Made-Up Thing," a new book.

VANEK SMITH: You're really promoting it (laughter).

GOLDSTEIN: Stacey, I brought props for us to do THE INDICATOR.

VANEK SMITH: All right. I will be right down.

GOLDSTEIN: OK. Come down.

VANEK SMITH: I'm going to come down. Give me two seconds.




GOLDSTEIN: Hi, Stacey.

VANEK SMITH: Welcome to the neighborhood.

GOLDSTEIN: Yeah. It's been months.

VANEK SMITH: It's been a lot of months. It's been, like, eight months?


GOLDSTEIN: I think that guy's been honking the whole eight months.

VANEK SMITH: He has, actually. I can vouch for that.

GOLDSTEIN: I have props. I came over so I could give you these props.


GOLDSTEIN: Go ahead and look at them.

VANEK SMITH: All right. OK. So this is, like, a really high-quality Xerox of an old piece of money. Oh, my gosh. It's a $3 bill.

GOLDSTEIN: Three dollar bill.

VANEK SMITH: That's really cool.

GOLDSTEIN: Is it even a real thing?

VANEK SMITH: There's, like, a lady standing next to - in, like, a ball gown standing next to a cow.

GOLDSTEIN: A cow - I chose a cow to kind of pander to you.

VANEK SMITH: I do love a cow.

GOLDSTEIN: Keep going.

VANEK SMITH: OK. The Orange Bank - it's orange.

GOLDSTEIN: Yeah because it's from the Orange Bank.

VANEK SMITH: And this is a $1 bill.

GOLDSTEIN: So, Stacey, these are reproductions of real paper money that was printed by private banks in the United States in the 1840s and '50s. This is one of the most interesting periods I found in the history of money when I was working on my book. It's this moment when the United States government did not print money. There was, in fact, no single national paper currency. But if you wanted to, you know, open up Stacey's Bank of New York and print your own paper money, you could.

VANEK SMITH: I don't know if I would trust that dollar from that bank (laughter).

GOLDSTEIN: It was a real problem. That was a real problem. We'll get to that. I mean, there were just so many different kinds of money. At one point, the Chicago Tribune counted 8,370 different kinds of paper money in America.

VANEK SMITH: This sounds very confusing for everyone involved. This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

GOLDSTEIN: And I'm Jacob Goldstein. Can we make 8,370 the indicator?


GOLDSTEIN: Today on the show - how can you even have that many kinds of money? And also just what does it tell us about how money works?


GOLDSTEIN: Let's just go - let's just go, like, a block away to get away from the horn, yeah?

VANEK SMITH: Yeah, yeah.


VANEK SMITH: So, OK, we should set the scene here, Jacob. This is the 19th century America - lots of cows, apparently. Also this was the era when gold and silver were money. And, Jacob, you say in the book that the government minted gold and silver coins, but it did not make paper money at that time.

GOLDSTEIN: Exactly right. So the only paper money in America was printed by all of these different private banks. People called paper money, in fact, bank notes, right? So they thought of it as, like, a piece of paper from a bank, and they thought of paper money in particular as, like, a receipt or a coat check ticket, as a thing that you could substitute for gold and silver. And in fact, if you look at the bills I gave you, they all have this kind of cursive writing. Like, here, just grab a different one for fun so we can say what it looks like.

VANEK SMITH: OK. This is the Stonington Bank, a $2 bill. There's a - some whales. This is very cool.

GOLDSTEIN: Yeah, like, right? It's, like, "Moby Dick" or something.

VANEK SMITH: It's a whale bill. We have a cow bill and a whale bill.

GOLDSTEIN: So - OK. So now look at the cursive writing. See the cursive there just below where it says Stonington Bank? Can you read it?

VANEK SMITH: Yeah. We'll pay $2 to the bearer on demand.

GOLDSTEIN: Right. And if you look, all these different bills, they're different colors. They have different pictures on them, but they all say that - we'll pay however many dollars to the bearer on demand. And so the...

VANEK SMITH: It's like an IOU.

GOLDSTEIN: Yeah. It's an IOU because the interesting thing is it's telling you the paper money is not the real money, right? They're saying, we will give you $2 in gold and silver for this paper money, right? So the real money in this world is the underlying gold or silver. The paper is just, like, the stand-in.

VANEK SMITH: So this is a time in history when there's not a federal bank. There's not a national bank. There's just, like, thousands of little local banks. And I guess all these banks can issue their own money.

GOLDSTEIN: That's right. And it's kind of evolving in this period. Like, at the beginning of this era, the 1830s, if you wanted to open a bank, typically you had to go to your state legislature and get special approval. Basically, they had to pass a special law that would let you open your bank. And this was problematic because it was super corrupt, essentially, right? If you could open a bank and print money, then you're going to bribe whoever you have to bribe...

VANEK SMITH: What could possibly go wrong?

GOLDSTEIN: ...In, say, Albany, all due respect, to get them to let you open your bank, right? So around 1840, a little earlier, this new idea became popular. The new idea was called free banking. And the idea of free banking was anybody who was willing to follow a few basic rules could open their own bank.

VANEK SMITH: And start printing money.

GOLDSTEIN: And literally start printing money. And, you know, not surprisingly, a lot of people wanted to print money.

VANEK SMITH: This is how we get 8,000 different kinds of money.


VANEK SMITH: How do you know if the bill that someone's handing you is real money or if it's literally just a piece of paper from the First Bank of Stacey Vanek Smith?

GOLDSTEIN: Which might be real money.

VANEK SMITH: You wouldn't know. Maybe I bribed a senator.

GOLDSTEIN: So I love this part. So there arose in response to this problem these special periodicals, kind of like magazines, that were privately published called Bank Note Reporters. And what they were was these lists in tiny font of every kind of money. So I actually have a reproduction here - another prop - from a page. This one is called Thompson's Bank Note Reporter. OK. So the people who would subscribe to this are merchants, people who need to accept money. So let's just say I'm running a bar, and I got my Thompson's Bank Note Reporter.

VANEK SMITH: And I come in, and I need a drink.

GOLDSTEIN: You're thirsty.

VANEK SMITH: I'm thirsty.

GOLDSTEIN: So - OK. So the page of the Bank Note Reporter I printed out is for the Orange Bank.

VANEK SMITH: OK. Here's my...

GOLDSTEIN: OK. So you have that bill, right?

VANEK SMITH: Got it. Here it is.

GOLDSTEIN: And it's a $1 bill, right?

VANEK SMITH: It's a $1 bill.

GOLDSTEIN: So I find the Orange Bank here in my Bank Note Reporter, and it says, OK, Orange Bank and it lists the different bills. It says ones, and then under ones, it describes what the bill is supposed to look like. It says two horses.


GOLDSTEIN: Hay cart.


GOLDSTEIN: Blacksmith shop.


GOLDSTEIN: Male portrait.




GOLDSTEIN: So it's at least plausibly real. And this Bank Note Reporter also tells me something else that's important and that explains a lot about how money works at this time. Typically it would tell me whether I should accept that paper money at full face value.

VANEK SMITH: I can buy my dollar whiskey with this bill.

GOLDSTEIN: Right, whether you can get your dollar whiskey because, remember, what we care about is whether I can turn in that paper money for gold or silver. And so if the bank is shaky or even if it's just really far away, you know, the Reporter might say just knock five cents off the dollar. Give Stacey 95 cents' worth of whiskey instead of a dollar.

VANEK SMITH: That took a really long time to buy that whiskey.

GOLDSTEIN: Yeah. It does seem like it would have been absurdly inconvenient, right? And for a long time, when people looked back at this period, the basic story of free banking was just that was a horrible idea, right? Like, who wants that many kinds of money?


GOLDSTEIN: But much later, like, in the 1970s, this generation of economic historians started going back and looking more closely at the banks and how money worked in this period. And what they saw when they really went through the numbers was basically, like, it wasn't that bad. Banks didn't go bust that often. People didn't usually lose much money when they used weird notes, you know. Overall, they would lose, like, a few percent, you know, which is kind of like what you pay today, say, when you take money out of the weird off-brand ATM at the corner store.

VANEK SMITH: Oh, yes, which I always do.

GOLDSTEIN: Yeah. I mean, that's basically, like, you know, the bartender's giving you 90 cents for your dollar when you do that, right?

VANEK SMITH: So, obviously, we do not have 8,000 different kinds of money now. This ended, and it ended after the Civil War.

GOLDSTEIN: Yeah. It was the Civil War. So during the Civil War, that old American argument of can we have national banks or not came up again. And Congress passed a few important banking laws. One of them basically taxed all those thousands of kind of state bank notes out of existence. And then the other one created these new national banks that printed much more reliable, much more uniform paper money.

VANEK SMITH: It's interesting because, I mean, this was - obviously, after the Civil War was the time when the United States went from - it was, like, a collection of states to one country. And it seems like the same thing happened with currency maybe not a coincidence.

GOLDSTEIN: Yeah. I mean, there is this idea at least in the kind of modern world that money is part of what makes a country a country. And I think you do see that happening at this moment in the United States when we go from thousands of kinds of money toward one uniform kind of paper money.

VANEK SMITH: I'm just sad we lost the cow bills because, you know, Jacob, I have a fever.

GOLDSTEIN: And the cure?

VANEK SMITH: More cow bills (laughter).


VANEK SMITH: Jacob, this story and like a whole bunch of other, like, really cool stories like this are in your new book.

GOLDSTEIN: "Money: The True Story Of A Made-Up Thing."

VANEK SMITH: This episode of THE INDICATOR was produced by Nick Fountain, fact-checked by Brittany Cronin. THE INDICATOR's edited by Paddy Hirsch and is a production of NPR.

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