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November 8, 2012

Fractional currency

Filed under: Our Favorite Things — Lizzie Ehrenhalt @ 4:07 pm

If the words “United States” weren’t printed on it, you might think that this unusual bill came from Canada or Great Britain.  But it’s very American, and evidence of a curious chapter in the history of American money.  It’s an example of fractional currency, so called because it was issued in denominations (3, 5, 10, 15, 25, and 50 cents) worth less than $1.00.   The use of fractional currency dates to the Civil War, when wartime inflation accompanied a sharp decrease in the value of paper money.   Panicky citizens hoarded anything they could find containing precious metals, including pennies, nickels, dimes and quarters.  Coins all but disappeared from circulation, making simple cash transactions difficult.

Casting about for a solution to the problem, U.S. Treasury Secretary Salmon P. Chase hit on the idea of pasting postage stamps to pieces of paper.  The resulting bills posed no hoarding risk but could be created in various low-value denominations and exchanged for legal tender.  The new postal currency proved so popular that the Treasury approved additional issues (this time of better-designed, harder-to-counterfeit bills that were themselves legal tender), and fractional currency was born. The era of the five-cent note lasted until 1876, when Americans were once again willing to part with their nickels and dimes in order to make exact change.

The unfamiliar gentleman on the five-cent bill shown above is Spencer M. Clark, Superintendent of the National Currency Bureau (now the Bureau of Printing and Engraving) from 1862 to 1868. Stories differ as to how Clark’s portrait came to be printed on the bill.  Some say that the intended honoree was explorer William Clark, others Freeman Clark, a New York representative and eventual Comptroller of the Currency.  Whatever the Bureau’s original plans, the superintendent saw to it that his own likeness appeared on the bill instead of one of his namesakes’.  His arrogant move scandalized Congress, which responded by retiring all five-cent notes and passing a law banning portraits of living people from appearing on currency.  Subsequent bill designers limited themselves to images of Lady Liberty (pictured on the 10- and 15-cent notes above), deceased Treasury secretaries and founding fathers like George Washington.

Lizzie Ehrenhalt, Collections Assistant

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