Governments usually want to hold the monopoly on the manufacture of money. This gives a benevolent government control over the economy and a malevolent government the power to raise revenue by printing devalued currency. The counterfeiter who issues worthless notes for personal gain competes with the government who issues worthless notes to pay for war or as an alternative to raising taxes. Perhaps the worst harm on society of counterfeiting is undermining the confidence the public puts in its “real” money.
Colonial European settlers in North American sometimes used Native American wampum as money, though its value was mostly ornamentation. Wampum was usually made from shells and served as a medium of exchange between Native Americans and settlers. The natives were very happy to make only enough wampum to meet their needs of decoration or commerce. The Europeans using iron tools were more efficient at making the wampum and “counterfeited” great amounts. This extra wampum caused the ultimate result of counterfeiting, inflation and the total devaluing of this type of currency.
For trading among themselves, the European colonists preferred the coins of Europe, and especially, those of England, since the basis of exchange was the imperial system (pounds, shillings, pence, etc.) These coins were scarce in the American colonies. The result was that colonialists had to resort to their own form of “wampum” and substituted tobacco or furs, which, at least, had tangible and useful value.
The coins of Spain were substituted for the scarce English coins. The Spanish “piece-of-eight” was a coin that had a cross on the back. This cross helped shopkeepers “make change.” If a transaction was less than the value of a coin, it was sometimes cut in half. Halves could be cut into quarters and quarters could be cut into bits. (Shave and a hair cut, knock, knock, - two bits.) The bit worth 12-1/2 cents on a “dollar” coin could also be cut in half. This 6-1/4 part came to be known as a “picaillon” or halfpenny in French or “half dime.” The word “picayune” comes from this small fractional coin for something trivial.
Some early coins were made by simply stamping out a measured amount of metal with the blow of a die and hammer. These coins were not all uniformly round. The odd bits of coinage and the irregularly shaped whole coins were easy targets for “coin shavers.” The shaver would file or cut from the edge small amounts of metal, perhaps. to eventually collect enough of the metal to melt down for another coin or other illicit purposes. Later, coins were uniformly round and had “milled” edges to counter this problem. This was one of the first anti-counterfeiting measures applied to money.
The Colonies had many types of money in circulation. One of the first mints was set up in Massachusetts in 1652 and struck the “pine-tree” shilling. It was privately owned and was an example of individuals setting up their own moneymaking system. Unlike counterfeit, it had real value and was widely accepted.
The first issue of public notes or bills was in 1690 by the Massachusetts Bay Colony. These were really “bills of credit” given to soldiers. They promised redemption in gold or silver, but were legal tender. Other colonies also began to print money as a means of raising revenue for the operation of government. They were usually backed by a promise to pay in gold or silver “on demand” or at some appointed date. Some notes promised tobacco, looking back to using tobacco as a means of trade.
North Carolina, which had no printers at the time, issued a handwritten note. The bill was drawn in a book of blank pages and then cut from a book. Highly decorative edges were drawn and the signatures of officials were added. Suspect notes could be compared to the hole in the book and matched to edge marks and numbers.
Public banks began to issue notes backed by property mortgages. Benjamin Franklin was an advocate of a printed-paper currency. He had the ulterior motive to gain the printing business making the notes. He did get the contract from the Pennsylvania Land Bank for its notes.
Almost at once, attempts were made to counterfeit Franklin’s notes. He tried several means to stop the thieves. Since he controlled his own paper and ink manufacturing, he had the papermaker put in flakes of mica into his currency paper. The assumption was that counterfeiters would not have this paper. Another attempt, less successful, was when he misspelled “Pennsylvania” and hoped that counterfeits would assume they were copying another counterfeit and correct the “mistake.”
Some colonies issued too much money and caused inflation in 1764 the British banned all paper money in the colony. The result was a restricting of commerce. Presumably, even “bad” money was better than no money at all. This ban was one more cause of the Revolutionary War.
When the war finally broke out, the Continental Congress financed the war with printed scrip that had no backing. These Continental notes fell in value to almost nothing. Soldiers paid with the worthless notes were known to stuff them into their worn boots for insulation against the cold. The expression “not worth a Continental” came from this note.
Paul Revere an engraver had better luck at making “counterfeit proof” notes. He did them by the intaglio engraved process. Fewer printers had the skill to do this type of printing. Revere is known as the father of the American bank note industry.
The dollar was established, after the war, as the new national currency replacing the scrip of individual states. These notes were not successful, and the country returned to Spanish coins. Cities, states, private banks and businesses still issued notes of debt that were circulated as currency. These were widely counterfeited. The American Banknote Company of New York City made many of the better notes.
Just before the American Civil War, the Confederate government ordered its money printed by the American Banknote Company in New York. So the first Confederate money was printed in the New York City. At the outbreak of war, the American Banknote Company moved its Confederate business to New Orleans and changed its name to the Southern Banknote Company. Various states continued to issue their own money by lithography, letterpress, and engraving.
The Confederate money called “blue backs,” was widely copied in the North and shipped south for circulation. Wartime conditions and shortages of printing supplies made the real Confederate bills inferior to the Northern counterfeits. The well-made Northern notes were easily spotted as counterfeit.
Because there were thousands of private bank, city and state notes in circulation, and because many of theses were counterfeit, the Federal government in 1862 issued a federal note. Federal notes were called “green backs,” at the time of the Civil War and soon were also widely counterfeited.
Abraham Lincoln had the Secret Service organized to investigate and stop counterfeiting. The day he signed the authorization for the forming of the Secret Service was the day he was shot at Ford’s Theater.
Copyright © 2000 by Frank Granger
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