150 Years Of US Fiat

Tyler Durden's picture

5 days ago saw the 150th year anniversary of an event so historic that a very select few even noticed: the birth of US fiat. Bloomberg was one of the few who commemorated the birth of modern US currency: "On April 2, 1862, the first greenback left the U.S. Treasury, marking the start of a new era in the American monetary system.... The greenbacks were originally intended to be a temporary emergency-financing measure. Almost bankrupt, the Treasury needed money to pay suppliers and troops. The plan was to print a limited supply of United States notes to meet the crisis and then have people convert the currency into Treasury bonds. But United States notes grew in popularity and continued to circulate." The rest, as they say is history. In the intervening 150 years, the greenback saw major transformations: from being issued by the Treasury and backed by gold, it is now printed, mostly in electronic form, by an entity that in its own words, is "set up similarly to private corporations, but operated in the public interest." Of course, when said public interest is not the primary driver of operation, the entity, also known as the Federal Reserve is accountable to precisely nobody. Oh, and the fiat money, which is now just a balance sheet liability of a private corporation, and thus just a plug to the Fed's deficit monetization efforts, is no longer backed by anything besides the "full faith and credit" of a country that is forced to fund more than half of its spending through debt issuance than tax revenues.

More on the history of American fiat from Bloomberg:

At the start of the Civil War, the U.S. didn't have a national paper currency. Instead, the money supply consisted of U.S. coins and a collection of paper notes issued by private banks. Technically, the federal government began issuing its own paper currency in 1861. That year, the Lincoln administration issued $60 million in demand notes, a variant of a Treasury note that was redeemable "on demand" for gold coins at the Treasury or any sub-Treasury.


These notes were overshadowed in 1862 by the issue of $150 million in a new fiat currency officially known as United States notes and popularly known as greenbacks or legal tenders. By the end of the war, close to $450 million worth of greenbacks were in circulation.


The name greenbacks referred to the reverse of the notes, which were printed in green. The name legal-tender notes referred to the text that originally appeared on the back, which began, "This note is legal tender for all debts, public and private." This provision made the currency a valid form of payment on par with gold and silver, which was a very controversial action at the time. It made the United States note a fiat currency -- meaning its value was established by law alone and wasn't based on some other unit of value, such as gold, silver or land.


Many Americans during and after the Civil War believed the creation of a fiat currency was unconstitutional. The Constitution explicitly stated that only gold and silver could be considered legal tender. In 1871, in the case of Knox v. Lee, the Supreme Court settled the matter by declaring that making United States notes legal tender was indeed constitutional.


By this time, the greenback was at the center of a countrywide debate on monetary policy. When the post-Civil War economic boom ended in the panic and depression of 1873, many people, especially farmers, blamed the Treasury’s policy of contracting the currency -- that is, removing United States notes from circulation in an attempt to go back to the gold standard, which would require that a $1 note could be redeemed for $1 in gold.


As a consequence, there was a call for the expansion of United States note circulation or an inflation of the currency. This belief became joined with a political ideology that opposed big business and banking interests, resulting in the birth of the Greenback Party in 1874.


Opposing the Greenbackers were more conservative interests, sometimes known as "gold bugs,'' who found support in the Republican Party and in elements of the Democratic Party. Gold interests proved the stronger contestant in the debate and in 1878, the total circulation of United States notes was fixed at a little over $346 million and the notes eventually became redeemable in gold (at least until 1933, when this provision was removed).


During the 20th century, United States notes became ever less important in the nation’s money supply, though Congress supported their continued circulation. They were increasingly replaced by currency issued by the Federal Reserve System, which came to look almost identical to the United States note. The Federal Reserve note thus became the new greenback.


In 1966, Congress allowed the Treasury to start removing United States notes from circulation. The last delivery of the notes by the Bureau of Engraving and Printing to the Treasury was made in 1971. In 1994, the Riegle Community Development and Regulatory Improvement Act eliminated the issuance of the notes altogether.

So instead of real money, America has an impostor "which came to look almost identical to the United States note" with the full complicity of everyone in charge, just so that when needed, any and all untenable debt burdens can be inflated away. And while the latter is a topic of a whole different discussion, we present another chart which, unlike the 150th anniversary of fiat, should be something discussed far more broadly... Because in a fiat world superpower status is always relative.

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SilverTree's picture

I am gonna make a t-shirt with the "Reserve Currency status does not last forever" graphic on it. 

I am Jobe's picture

Good idea. How abut ZH shirts with that on it.

Ahmeexnal's picture

It's Bush's fault:






THE news from north of the border is both trivial and unsettling: they won’t be making shiny new pennies in Canada anymore.


Buckaroo Banzai's picture

Not to pick nits, but the demonetization of silver in 1873 (the "Crime of 73") probably had more to do with the recession/depression that started at that time, than the withdrawal of greenbacks did.

Western's picture



You guys want to see some lolz, check the comment posts over at Silver Doc's website. I just don't understand where people get the energy to post this tripe, they're either sociopaths or poor psyop attempts;

Jim SaintClair said...

Stack the drop huh? "won't see silver at these prices any more!" Hmm heard that when it was $40, $35, $27, $34, $37 and now $31.

Oh by the way, 10% over spot for silver so that's an extra amount gone too on my investment. Oh plus I don't get that 10% if I sell to dealers so, lets see, selling $40,000 worth of stuff privately huh? That's kind of dangerous!

Worst investment in history!

Should have bought some apple stock in 2003 for $15 a share!!! Way better investment than silver at $4 a share in 2003!!

By the way, Bix weir's article is crap of the silver bug community rumour sites. I wasted money on private subscription, you shouldn't too!!

Oh regional Indian's picture

Actually the decleration of Bankruptcy in 1933 was the original crime. Monetary or otherwise.

It was a global bankruptcy too and most world CB's (India's RBI, reserve Bank of India was one) were set up in 1933 ( BIS was set up in 1930 as a pre-cursor).

Ever since then, it's been a massive Con. Support the illusion instead of reality.



hamurobby's picture

Agreed, very few have any idea the US declared bankruptcy and the Federal reserve bank is managing the US bankruptcy since 1933.

June 5th 1933, Franklin Roosevelt proclaimed the bankruptcy of the United States.  Every 14th-Amendment “citizen of the United States” [everything was already set up!] was pledged as an asset to finance the Chapter 11 re-organization expenses and pay interest in perpetuity to the creditors (i.e. the Federal Reserve Bankers) on the “national debt” (“which shall not be questioned”).  

Straying from the flock's picture

We are born into bondage.  It is the normalcy bias that keeps us enslaved.  Most do not know that they have a choice.  They have been part of the herd since they were born and know no better.  It is our duty to help inform the masses that they have been lied to.

Marco's picture

FDR took the US temporarily off the gold standard and confiscated gold ... INCLUDING FED GOLD!!! He fucked the Fed just as much as he fucked every gold owner who turned their gold in ... he took their gold and the only thing he pledged in return was paper.

What you are describing was the function of the Fed at it's creation, FDR suspended that function ... he certainly didn't create it.

batushka's picture

the forclosure and confiscation of assets is going to be a real bitch.

rwe2late's picture


It's not just pennies. It's all cash. Debit/credit cards only.

Sweden, the NATO partner, is the first to go cashless.

All your donations, gifts, purchases, payments, earnings will be tracked by the NSA "Big Brother" computer in Utah.



disabledvet's picture

that can't happen in the USA. Too much "food stuff." With food retail such a critical component of the US economy ("mass consumerism") cash has to kept alive as a payment medium. The other problem is jobs. "Cash is still a viable payment option" even in a recession. And obviously "the bankers won't complain about that." At least not the smaller ones...I do agree "no (bankrupt) government wants a cash economy." Those governments will fail...very quickly i might add. A gold standard would be even more interesting actually..."cash convertible into gold." Hmmm. There's an interesting idea. I still have a silver certificate.

smiler03's picture

"that can't happen in the USA.".

If you read the linked article you might have seen this " In Iceland and the US, 93 per cent of retail transactions were non-cash. In Sweden it is 97 per cent."

That's a 4% difference. Not a lot. As for food, 46 million Americans get their food via a SNAP card I believe.

Mr Drysdale's picture

Occasionally I buy an old 'beater' car and pull the engine and trans for use in a project of mine. I then take the remains to the recycle yard where the car is crushed/shredded.

Right now, the yard has software that starting 2013(?) whenever the 600$ limit is reached,(vendor/person-part of obamacare) the recycle company will issue a 1099 to me AND has to have a SSN and bank account to "pay out"

So yes, "they" are looking at grabbing every last little crumb of cash that you can make, and tracking it. EBT cards for everyone!

smiler03's picture

In one respect that could be a good idea. Due to rising prices huge amounts of metals are being stolen worldwide. It might just save your neighborhood from the scum that are ripping down your phone and power cables.


But, as I understand it Americans would view trapping criminals with technology as a breach of their human rights. (based on another thread where lots of people downvoted my post that using technology to trap people who don't insure their cars (as required by law) was a good idea).

BobPaulson's picture

BTW, the Canadian penny is now made of steel (4.5% copper), so it won't be missed. Don't bother collecting them. The time to begin hoarding pennies was 1982.

duncecap rack's picture

Or how about "On along enough timescale the survival rate of everyone goes to Zero"?

Gooseleg's picture

See through the news and the views that twist reality
I call the bluff
Manifest destiny

vast-dom's picture

On on verso:


definition of OXYMORON: Set up similarly to private corporations, but operated in the public interest.

Axenolith's picture

Count me as a potential buyer!

peekcrackers's picture

Fiat T-shirt on my back and Tally sticks on my jock

SRSrocco's picture


It becomes a joke trying to go by Technical analysis anymore to predict short term moves.  I discuss this and silver's 10 year tend in the article linked below:



Nukular Freedum's picture

How to determine the money supply is the most difficult and contentious issue in all economics. It behooves us to find a solution which is not to inflexible but not too flexible or corruptible either. No one has yet supplied us tthis holy grail.
Perhaps a libertarian solution necessarily suggests itself, albeit not the official Austrian or Misesian one.
 I do not believe that the classical gold standard pegging currencies at a fixed rate to gold is commensurate with Libertarian values since the fixed rate is determined by govt fiat. If gold and oil is fully tradable in currency this should be sufficient, in theory to keep the currency honest.
 But the real secret, is to let the money markets determine the money rates, not a central planning agency like a Central Bank. “What is commensurate with free-markets” is the question. Free- banking anyone?
 Banning FIxed Reserve Banking is counter-libertarian also, but so too is supplying a publicly funded lender of last reserve to it as well. Let banks operate frb to their hearts content in as open a manner as possible, but also let them and their shareholders/account holders take full responsibility for any resulting insolvency.
Really the private banking sector should be responsible for things like note issuance, money supply, the money rate, fractional reserve limits, deposit insurance and lender of last resort provision. This will lead to a more fluid and stable situation, as explained in this article by George Selgin: (The Case Against Currency Monopoly: 2008)


Incidentally the govt. which maintained frb practices whilst every other govt. maintained a 100% gold standard would end up owning the world, no? In short the 100% system (where the metal itself is alone the currency) may fall victim to the “free-rider” problem.
That is also why free- banking should be permitted alongside money rates set by the free- market and NO public underwriting of insolvency, no public (as distinct from wholly private) lender of last resort. This is the true free-market solution. Yes banker games will go on, but not with impunity. 

Husk-Erzulie's picture

Thoughtful post, thank you :-)

rwe2late's picture


when a bank goes bankrupt,

all the small depositors lose their savings?

Nukular Freedum's picture

No Sir, there is deposit insurance, privately supplied.

Husk-Erzulie's picture

Husks' Private Rural Bank Inc-

We exist to serve farmers and small business and industry in New England by making sound money available in the market place.

We are proud of our role in the economy; we take that role, and our reputation very seriously indeed.

We guarantee that our reserve ratio will never exceed 8% on our assets which include gold, silver, copper, other rare refined minerals, and real estate.  Our balance sheet will never include derivitive or other synthetic assets such are mortgage backed securities etc.

Our paper is accepted at par in every state of the union, Canada and Mexico.  Our paper is accepted in almost every sovereign nation in the world at little to no discount.  Our paper has always been convertable on demand in any of our branch offices as well as by cooperating institutions in other regions.

Deposit accounts are insured first by xyz private deposit insurance and further by the cooperative network of banking institutions to which we belong.

Our books are always open to our depositors and business partners at any time.

Our vaults which store our assets as well as those of our customers (PM's, art, antiques, data, documents, paper etc etc) are as sound as we can make them.

We are honest, conservative, old school bankers.  We do business by being above board and by being the best.

Yes, panics happen, disaters happen, crashes, wars, etc but when TSHTF wouldn't you rather be banking with us than with MF Global or some shitty, shady S and L supposedly insured by FDIC? 

We have never yet revealed private asset information of our customers to any police or .gov agency on a fishing expedition.  We make our reputation by going to the mat for our customers privacy.

Everybody knows that banking has its risks and rewards.  Holding paper isn't 100% safe, it never will be, but doing business requires it, so would you rather be holding Magic Inflating Bennie Bux or holding and trading with the best, Husks' Paper.

That's how it could be...


BobPaulson's picture

I still think the best unit of currency has to be convertable to an energy unit like Joules, kWh or BTUs. This also inherently promotes energy efficiency. It's not inflatable but not reliant on the amount of a mineral in/out of the ground. IMHO, the problem with gold is that there is too little of it so it continues to be manipulated.

I'm not convinced gold will ever reach its promised land and break free of sovereign manipulation.

smiler03's picture

Go long Uranium-235 ;O)

Die Weiße Rose's picture

and the most glorious pink Elephant no self-denying Anglophile will ever talk about:

London the " financial Centre of Europe " the last bastille of the british failing Empire, and the United Kingdom is in Recession as we speak -

Yes, England (the not so United Queendom) is by far the worst of all indebted soverein Nations of Europe.

UK national Debt is about 10 trillion USD as we speak ! the UK has the highest gross foreign debt of any European country (€7.3 trillion; €117,580 per person) due in large part to its highly leveraged financial industry, which is closely connected with both the United States and the eurozone. 

UK is back in recession, says OECD

(By Emma Rowley 6:30PM BST 29 Mar 2012)  

Britain has plunged back into a recession, as the economy continued to shrink in the first three months of the year, according to a leading global authority. After the 0.3pc contraction seen at the end of 2011, this would signal that the UK has "double-dipped" back into recession, defined as two quarters of negative growth.

The Bank of England should embark on more quantitative easing – its money-printing programme

which currently stands at £325bn - "sooner rather than later", said Pier Carlo Padoan, chief economist at the Paris-based think-tank. But he said the Chancellor must not relax his austerity programme, citing the low yields - interest rates - on UK government debt as a benefit. "Our recommendation is to stay the course," he said.

(10y UK Gov-Bonds yield currently 2.20%) "The UK will scrape out of this new Recession in the second quarter, the OECD believes, with 0.1pc growth".


...and with Government spending and Debt at Olympic Record Proportions,

we wish the good old leveraged british Empire of MF-England good luck...

they sure will need it selling more of those MF-Global 40:1 leveraged financial derivatives and any other of such algo-value UK deprived Junk - that brought about the 2008 Global Financial Crisis.

Now I want some red arrows please, just to show you still care...


Lednbrass's picture

I dont think there are many people at this site who would argue that the UK isnt completely screwed.

Europeans and Germans in particular though often seem to get upset when people point out that the EU is completely screwed and take it personally.


Ahmeexnal's picture

wr, the teutonic lady:

everyone knows the UK is sinking, right along with the rest of the EU.

Are jobs for german ladies at the FKK clubs in danger because of the massive influx of PIIGS ladies?



Sabremesh's picture

Off topic and flogging a dead horse (ein totes pferd, to you).

The UK is undoubtedly in a fragile state, just like the US and the Eurozone, but it is impossible to predict who will come out this worse. The only safe thing to say is that we are all screwed - there won't be any winners come the inevitable global currency crash. However, those countries (and individuals) who own gold (and oil) will be able to recover most quickly.

BobPaulson's picture

The places that repudiate their debt, go through the grinding stage of sky high interest rates have to produce their way out of their hole and rely on internal economics to pull themselves out of the quagmire.

Neo1's picture

A Banksters worst nightmare, Being forced to Return to Real Money=United States Note=Lawful Money. The real reason you pay an income tax, is for the privilege of using a private currency. Also known As A:  Federal Reserve Note, Demand from your bank or brokerage, lawful money and the tax goes away, with a tax exemption on lawful money, all of your money is yours.


Tax Exemption: http://stormthunder.com/federal-reserve-act/

Web search these four different phrases: Redeemed in Lawful Money  or  United States Note  or Redeemed in Lawful Money Pursuant to Title 12 USC §411  or deposited for credit on account or exchanged for non-negotiable federal reserve notes of face value  

Papasmurf's picture

gold is missing from that chart

SRSrocco's picture


Yes, it is true, that I did not discuss gold, but I will in my second article coming out in May.  The Mining Industry runs on Diesel fuel.  The Metal Analysts are forecasting increased metal production of most metals until the end of the decade.  They fail to realize NETOIL EXPORTS fall off a cliff from here.

I will be discussing the diesel consumption in the top 5 gold mining companies as well as in the copper industry.  I believe global diesel production peaks shortly, putting an end to the HUGE FORECASTED GROWTH of Gold, Silver, Copper and etc in the next several years.

This is extremely good for the price of gold and silver

LowProfile's picture

Share it with the Durdens, it would make a good guest post.

Husk-Erzulie's picture

I agree, it's a really interesting, and likely quite controversial (and revealing), analysis.

smiler03's picture

I was going to say that this has already been done and I read it the other day, I rechecked the link and it's to your article!

I won't post it here ;O) 

Sudden Debt's picture

May it last another 150 days!

disabledvet's picture

Salmon P. Chase is dead. LONG LIVE SALMON P. CHASE!!!
(And CHASE Manhattan Bank, JP Morgan,CHASE bank, Bank of Ohio, Bank of Kentucky, Bank of America, Nation's Bank, Mellon's Bank, Bank of Belgium, Bank of France, Bank of Germany, Bank of Bezerkistan...

SwingForce's picture

G. Edward Griffin wrote a book that you MUST read....

gdogus erectus's picture

It wasn't until I read that book that I realized what a false flag was. It's what truely started me down the rabbit hole. And that was in '04.

I am Jobe's picture


Any thoughts on the Tshirts with FIAT currency on it.

Joebloinvestor's picture

They used to have a motto printed on the bill "Death to Counterfeiters".

Some of that old currency is art.