| By October 20, 2011 |
Under terms of the Resumption Act, Jan. 1, 1879, was to be an historic day. For the first time since the beginning of the Civil War, Americans were told that gold and silver coins were trading at parity with paper money and the U.S. Treasury would issue the full value of the note in gold or silver coins. All you had to do was present your paper money and ask for coins.
How unlike the dark days of 1863 just before the Battle of Gettysburg when it took $250 in federal paper money to buy $100 in gold coins.
As in other cases when people are told they can have all they want of a previously difficult to obtain commodity, the public decided they did not like bulky coins all that much and since the paper was at long last equal in value to gold and silver coins, they would opt to hold and use federal paper money.
Large quantities of coins were returned to the banking system as a result and mintages of many coin denominations plummeted for roughly a decade.
The irony, of course, is that after the inflationary binge that financed the Civil War, the opposite problem occurred: the price of silver started to fall dramatically as ever increasing supplies from the Comstock Lode defied all attempts by the government to buy it up and strike silver dollars out of it.
The government in 1879 was actually trying to get its finances in order and to make all of its obligations as good as gold, though this would not become law until the gold standard was formally adopted in 1900.
Gold Certificates were one of many forms federal paper money of the times took. These were notes that were supposed to have 100 percent gold backing.
The idea for Gold Certificates was a natural one. The Civil War had seen the use of gold and silver coins virtually disappear in most of the country. With the suspension of official specie payments it was uncertain when coins would return in any numbers. The North became a paper economy as did the South, but that did not mean the idea of a gold dollar disappeared. Instead, parallel accounts were often used quoting values of goods in paper and gold.
Also, anything that was purchased abroad had to be paid for in gold and the country’s merchants needed always to be aware of that.
Federal bank notes were a wartime necessity, extending down the denominational ladder at one point to as low as three cents.
People were uncertain based on past experiences with wildcat banks and the lore about the Revolutionary Continental Currency. But to live day to day, there were few if any other choices to using paper. Gaining the people’s confidence in bank notes was a major long-term challenge, but in light of the ebb and flow of news from the battlefields, there was also a strong short-term need to pay certain bills with gold.
It did not take long to put together a concept for bank notes backed by gold. The first authorization by Congress would come on March 3, 1863, adding Gold Certificates to the notes already approved. That was early as the outcome of the Civil War was still clearly in doubt and no one could even imagine how soon the conflict could be resolved. Despite the concerns, Gold Certificates were nearly an instant success.
It took until 1865 for the wishes of the act regarding Gold Certificates to become reality. The first three issues were issued 1865-1875 and were of upper denominations starting at $20 and including $100, $500, $1,000, $5,000 and $10,000. Realistically the notes were not expected to circulate with a face design using an eagle and shield while the backs were a bright orange giving them a distinctive appearance.
The second and third issues changed dramatically from the first in that they were uniface and carried portraits instead of the eagle and shield. The $100 featured Thomas Hart Benton, the distinguished senator from Missouri and well known hard money advocate. The $500 featured Abraham Lincoln while Alexander Hamilton was on the $1,000 with James Madison on the $5,000 and Andrew Jackson on the $10,000.
The problem with the first three issues of Gold Certificates is that almost none exists today. At present there is a small number known of all the issues combined as well as a few proofs and canceled notes. It is frustrating for collectors. The one known Series 1863 $20 for example is actually a nice note grading AU, making it close to a miracle note, although it did have small but well done restorations at the outer edge of the margins.
The first three issues are historic and rare, but the average or even wealthy collector with limited patience must really move on to the more available issues starting with the Series 1882 and running through the Series 1922. These issues are actually available, interesting and in some cases surprisingly inexpensive.
These notes were larger than current paper money, measuring 7 inches by 3 inches. Not surprisingly, after small-sze paper money was introduced in 1929, these older notes were called large-size notes in collector shorthand.
What must be remembered with large-size Gold Certificates is that their face values starting at $10 represented a large investment at the time. There was very little if any collecting of $10 and $20 gold coins at the time and even less of bank notes and those were the two lowest denominations of Gold Certificates.
There was an additional factor and that was survival as even if a note was saved originally, it still had to survive and the temptation to spend it would have been high at certain times, such as when an owner was injured, or lost his job or fell into some other hard times. Then there are the kids, who would likely be eager to spend Dad’s stash of paper money when they inherited it.
In addition, there was the Gold Recall Order of 1933 and it called in all Gold Certificates, including large-size. The federal government was intent on not honoring its obligations in gold and what better way to do that than to recall the paper promises to pay in gold?
We know that some did not turn in their notes as they are the collectible supply today, but it was not legal to own these notes again until the Kennedy administration... read more>>
