What Is a Greenback?
Let me explain what a greenback is—it's a slang term for U.S. paper dollars. This term started in the mid-1860s when these notes were printed with green ink. Congress didn't have much taxing power back then, so they turned to paper currency to fund the Civil War.
People used 'greenback' as a negative term because these notes lacked solid financial backing, and banks hesitated to honor them at full value.
Key Takeaways
- Greenback is a slang term for U.S. dollars.
- The first greenbacks were printed to finance the Civil War and got their name from the green backs.
- Because they weren't fully backed by gold, greenbacks lost value and caused inflation in the northern economy.
- The first greenbacks were demand notes, used to pay salaries and government expenses in 1861-1862.
- These were later replaced by the Legal Tender Act of 1862, which authorized the paper notes that became the official currency.
Understanding Greenbacks
It took about half a century to clear out foreign coins and state currencies from circulation, but by the early 1800s, the U.S. was set to experiment with paper money again. Bank notes had been around, but banks issued more than they could back with coins, so they often traded below face value.
In the 1860s, the U.S. issued over $400 million in legal tender to fund its internal war. The government had used bonds before, but the war drained finances quickly.
Bankers opposed issuing paper money because it pulled the federal government into markets and risked bankruptcy if the war went badly. To avoid that, the paper money's value was tied to the issuing banks' health.
They earned the name greenbacks from the green printing on the backs. The government backed this currency, saying it could pay public and private debts, but you couldn't exchange it for gold or silver.
Important Note
Today, you'll hear foreign exchange traders use 'greenback' as an informal term for the U.S. dollar.
Demand Notes vs. Paper Notes
Greenbacks came in two types: demand notes and U.S. paper notes. Demand notes were issued in 1861 and 1862 to cover salaries and government costs during the Civil War. Then, in February 1862, the Legal Tender Act introduced paper notes, which phased out demand notes and became the official U.S. currency.
The value swung based on the North's war performance. With $400 million issued, greenbacks steadily lost value against gold.
As H. W. Brand details in Greenback Planet: How the Dollar Conquered the World and Threatened Civilization as We Know It, the greenback's value briefly recovered after Gettysburg but hit a low of 258 greenbacks to 100 gold in 1864. By war's end in 1865, it improved to 150 greenbacks to 100 gold.
Demand notes weren't legal tender, so private parties could refuse them. Banks differed in accepting paper notes.
Greenbacks funded 15% of the war's costs, but their rising value drove up prices for goods—inflation hit 14% in 1862 and 25% in 1863 and 1864.
Other articles for you
A named beneficiary is a person or entity designated in legal documents to receive assets from financial instruments like insurance policies or retirement accounts upon the owner's death.
A wrongful termination claim is a legal action filed by an employee who believes they were illegally fired, often due to discrimination, retaliation, or contract breaches.
A letter of guarantee is a bank's contractual promise to pay a supplier if the client defaults on a purchase or obligation.
The Personal Financial Specialist (PFS) is a certification for CPAs that expands their expertise into financial planning and wealth management.
Earnings yield measures a company's earnings per share relative to its stock price, helping investors assess value and potential returns.
Insurance riders are add-ons that customize basic policies by adding or altering coverage to meet specific needs.
The text explains the four main U.S
Rational choice theory explains how individuals make decisions to maximize self-interest and utility based on available information.
The Government Accountability Office (GAO) is an independent agency that audits and monitors U.S
Undivided profit refers to a company's accumulated earnings not distributed as dividends or transferred to surplus, often reinvested for growth.