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ACCent: The Monthly Newsletter of the Anchorage Coin Club

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Membership Meeting 1st Wed. each month, 7 PM, Central Lutheran Church, 15th and Cordova

May 2012

Vol. 25  No. 5

US State Banknotes Part II

By Larry Nakata (Life Member #3)

    Let me begin by asking "What is obsolete U.S. paper currency?" Answer: It is older U.S. currency that has been demonetized and can no longer be exchanged for what we use today.

Colonial Paper

    Such obsolete currency existed in the period prior to the U.S. Civil War. At that time our country's monetary policy (when it came to paper currency) was one of deregulation.

    Use of paper money really begin in Colonial times.... prior to the creation of the United States. In colonial times, there was not sufficient coinage to satisfy the needs of the American colonies.

    In 1690, Massachusetts issued paper money to fund their military expeditions into Canada. Other colonies would soon follow suit. These forms of money were called "Bills of Credit".... and were called such to appease the mother country (England). The rationale was that these "bills of credit" were treated as a loan used for a specific public purpose. It was a quaint way of getting around the mother country's rules. With the coming of the French and Indian Wars in the mid 18th century, more and more of these "Bills of Credit" would circulate throughout the colonies.

    The effect of having this paper currency was that it helped stimulate the economies of the colonies. Such currency could be exchanged for coins (when coins were available).

    With the conclusion of the French and Indian Wars, England took measures to repress any further issuance of these "Bills of Credit" in 1764. Such measures resulted in an adverse effect on the economies of the colonies. This was viewed a meddling in the economic affairs of the colonies and would prove to be one of the causes of the Revolutionary War. In fact, on the eve of the Revolutionary War, Alexander Hamilton (who would become the first Secretary of Treasury for the United States) estimated that the money supply in America was l/4th coin and 3/4th paper money.

    During the Revolutionary War, Continental Congress would issue Continental Currency used to fund the war effort. Each state was asked to issue such currency and to support it. Some did...some didn't. Still... some $241 million of Continental Currency was issued during the war. The public's faith in such currency would decline as the currency exchange rate changed from 1 -1, then 40-1, and later 250-1.... as the war years progressed.

Aggravating this problem were two developments as the war progressed:

-During the Revolutionary War, England counterfeited large amounts of Continental currency to undermine it's value.

-We see the development of State Bank Notes in which each state would encourage local banks to make and issue their own currency. Such currency to be backed by the local bank's reserves of gold and silver coinage and bullion.

    By the end of the Revolutionary War, the failure of Continental Currency would undermine any attempts to issue a national paper currency system in the United States. The State Bank Note system then became the prevailing system used until the Civil War.

Confederate Fifty


    The Constitution of the United States proved to be a dilemma in terms of monetary policy for paper currency. On one hand it allowed each state the right to have local banks issue their own paper currency. Yet, on the other hand, the Constitution also allowed for the Federal Government to establish a National Bank that would act as a repository for federal funds and act as the Federal government's fiscal agent. So, in 1791, Secretary of Treasury Alexander Hamilton would establish the First Bank of the United States with the authority to issue it's own paper currency.

    This would create an intense rivalry between both banking systems. What was at stake was the power of the Federal Government vs. State Rights in determination of monetary policy.

    Foreign countries at that time liked doing business with the Bank of the United States rather than having to deal with individual state banks. Dealing with one national bank made sense to such foreign countries. States contended that the Bank of the United States was too conservative in its monetary policies thus causing constraints to their respective State economies. The states lobbied and were successful in 1811 in preventing the renewal of the First Bank of the United States charter.... thus forcing it out of operation.

    The War of 1812 would result in the creation of the Second Bank of the United States. In order to finance the War of 1812, the United States Government had to establish a national bank that could deal with foreign countries. It was simply a matter that foreign countries liked doing business with one national bank rather than a number of State banks.

Thousand Gold


    After the War of 1812, the Second Bank of the United States would continue until 1836, when President Andrew Jackson would not allow renewal of the charter for the Second Bank of the United States. Thus in 1836, the Bank of the United States would again be forced out of operation.

    At this point, the State Bank system would again prevail and be used as the primary paper currency system until the Civil War.

The State Bank system had its problems:

- Differing monetary policies between each state was a problem. No two states did it the same.

- Foreign governments really wanted to deal with one national bank rather than a number of state banks.

- Problems with local banks "going under".

    A bank that issued its own paper currency was only as good as the gold and silver reserves in its vaults. In all cases, the bank always issued more paper currency than what gold and silver was in the vaults. As long as the public had faith in that bank, they would continue to use that bank's paper currency. If there was any sign of instability, the public would be quick in turning in that currency for gold and silver coinage (or bullion)... thus causing a "run on the bank". A lot of banks went under in this manner...resulting in economic instability by the start of the Civil War.

    Upon the start of the Civil War, the problem of funding the war effort resulted in the North and South taking measures to issue national paper currency.

- The Federal Government in the North would immediately force all state banks in the North to deposit (from their vaults) gold and silver equivalent to 10% of the value of their bank's paper money that was issued. This amounted to a 10% federal tax on the North's economy. The federal government would later do away with State Bank Notes and replace those notes with federal paper currency (in 1862).

- The Confederate Government in the South would allow State Bank Notes to continue, but also issued

    Confederate paper currency. When the North won the war, the State Bank notes of the South and the Confederate paper currency would be demonetized.

    The Civil War would thus result in the demise of the State Bank Note system...thus the term "Obsolete State Bank Notes". Federal currency prevails today... and the federal currency from 1862 still remains legal tender so that a $1 note from 1862 can be exchanged for a $1 Federal Reserve Note: I doubt a collector would be crazy enough to make such an exchange.

All other currencies have been rendered obsolete and have been demonetized.

So what is collectable:

- If you can find any colonial "Bills of Credit", they command very high prices. Older notes of this nature are tough to find since paper tends to deteriorate over a 250 year period.

Worn Note


There are lots of Continental Currency still around. Keep in mind that over $241 million of such currency circulated during the Revolutionary War.... so there are lots of surviving specimens. The one note I have is about $50 in value.

- Bank of the United State notes are very difficult to find. If you find one, better figure on spending quite a bit of money for that specimen. Better figure on spending thousand of dollars for such a note.

- Since there were thousands of banks throughout the United States in the first half of the 19th Century, lots of Obsolete State Bank Notes survive today. You can still buy a pretty good looking note in the $50 to $100 range.

- There is Confederate currency....which was demonetized by the North. Lots of specimens still survive today. It was hoped at the conclusion of the Civil War that the Federal Government in the North would one day allow Confederate currency to be redeemed for federal currency. Confederate currency was thus stashed away in attics in hopes this would happen Such did not occur, but lots of surviving specimens still abound. Like the Obsolete State Bank Notes, you can buy a pretty good looking note in the $50 to $100 range.

- And then.... there is the matter of Fractional Currency.... but that is another story.


Five Fractional



- "The Early Paper Money of the United States-Fourth Edition" by Eric P. Newman. Copyright 1997.

- "Standard Catalog of United States Obsolete Bank Notes 1782-1866 Volumes One thru Four" by James A. Haxby. Copyright 1988.





Last: LECTICOLN - Collection: a group of coins with something in common. A complete collection (one with an example of each) is a set.



April 4th Membership Meeting

Door Prize: 1972-S Jefferson Nickel Pr69 DCAM -certified National Numismatic Certification won by Margaret Wright.

Membership Prize: 1971 Jefferson Nickel MS 67 Full Steps- certified National Numismatic Certification won by Robert Hughes.

Glen Dean provided latest update on Numismatic School Program. At this time, Glen is in the process of stockpiling numismatic materials (coins, coin albums, coin magazines, coin books, etc.) for distribution to school children when presentations are made. Request was for club members to donate these items and get with Dean.

Stan Mead has confirmed that we have secured Abbott Community Park on Elmore Street for July 7th, 10 am to 5 pm.....for our coin club's Summer picnic event.

As there was no other business to discuss, Larry Nakata then went into his presentation on "U.S. Obsolete Bank Notes part I".

Following presentation, monthly coin auction was conducted.

Membership meeting then concluded following auction.



If you know why your Bank of Augusta dollar bill is only printed on one side ...

You are probably a numismatist...

And you should belong to the Anchorage Coin Club.


April 18th Board Meeting

    Meeting called to order at 6:30 pm by Secretary Larry Nakata. Carl (President) would later join meeting. Held at New Cauldron Restaurant.

    Following distribution of correspondence, Glen Dean gave a progress update on the School Program Project.

    At this time, a flyer has been made and submitted to the Anchorage School District. This flyer will be distributed to the school principals in the Anchorage School District. Flyer is focused on 5th and 6th Grade students. If a principal is interested in have the club do a presentation on Numismatics, that principal will then do a formal request to the Anchorage School District. The School District will then contact Glen Dean and arrange a date and time for the presentation.

Numismatic materials were provided to Glen Dean to stockpile by some of the Board members.

    Discussion on advertisers to our club newsletter. Loren (our editor) would like to see a couple of more local advertisers to our club newsletter. Also has been providing essentially free advertising for the last few years. Need to see if we can send letters out to our local advertisers on donating coins and numismatic materials as door prizes, membership prizes, and prizes to be given out at our club's Christmas party. Larry Nakata will send out according letters this month.

    Announcement by John Larson that there is an upcoming book sale at the Loussac Library on Saturday, May 5th St. Indication of lots of numismatic books to be sold. Some good deals can be found.... especially on the older books.

    July 7th Club Summer picnic. At our next club meeting on May 2nd, to be announced will be the club's yearly Numismatic Donation Auction. Members will be encouraged to donate items for the Donation auction with proceeds going to further Numismatics for the Anchorage Coin Club projects.

    For club's May 2nd Membership meeting, On the heels of his last presentation on "Obsolete U.S. Bank Notes", Larry Nakata will be giving a presentation on "Part II - U. S. Federal Currency". The club will provide sandwiches, chips, and soda pop at the May 2nd meeting, Club members should bring side dishes and desserts to augment the sandwiches.

As there was no further business to discuss, meeting adjourned at 7:30 pm..... Larry Nakata/Secretary.



Lots Submitted by Bill Fivaz for May 2nd Club Auction

1. 1835 U.S. Half Cent VF Minimum Bid (MB) $48

2. 1836 U.S. Large Center G No Minimum

3. 1895 Indian Cent EF No Minimum

4. 1924-D Lincoln Cent F/VF MB $38

5. 1950-D Jefferson Nickel BU No Minimum

6. 1914-D Barber Quarter Original in AU condition. MB $85

7. 1830 Bust Half Dollar VF MB $62

8. 1874 with Arrows Liberty Seated Half Dollar EF (Nice Type) MB $125

9. 1890-O Morgan Dollar VAM-10 "Comet Variety" (Hot 50) MS-60 MB $75

10. 1903-S Morgan Dollar AG MB $30

11. Seven (7) California "Gold Tokens" (NOT GOLD) No minimum

12. 1935-A HAWAII $1 Brown Seal Note Fine MB $29

13. 1928-D $2 Red Seal (F-1505 Mule) UNC MB $73

14. 1965-1969-S JFK Half Dollar Collection BU No Minimum

15. 1912 1c to 50c "Coins of the Titanic" Set (G-EF) MB $20

Donation Coins from Bill Fivaz

16. Seven (7) coin set of 1982 Lincoln Cent varieties

17. 50 coin set of BU State Quarters

18. 14 coin beginning set of Presidential dollars BU





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Send application and dues to :

Anchorage Coin Club
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Anchorage, Alaska 99523

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Quarter Eagle Reverse

TICKETS: $5 each or 5 for $20.00



President: Carl Mujagic

Vice President: Robert Hughes

Secretary: Larry Nakata

Treasurer: Stan Mead

Board Seat #1: Loren Lucason

Board Seat #2: John Larson

Board Seat #3: Tim Burke

ACCent Editor: Loren Lucason