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The Money In Circulation - Paper Currency

( Originally Published Early 1900's )

KEEPING the country supplied with paper currency is a large task for the Government. There is, of course, a sizable amount of it in circulation—on June 1, 1931, there were just about 884,000,000 pieces with an aggregate face value of $5,275,000,000.


There are eleven different denominations of the paper currency in current use—$1 the smallest, $10,000 the largest. The $1 denomination is most in use, and consequently certificates of that face value wear out or become soiled, so as to be unfit for further circulation, much more quickly than currency of larger denomination. The life of a note increases according to its denomination. The $1 certificate lasts, on an average, about eight or nine months; the average life of a two is about three months longer; a five lasts a little over a year, and so on, increasing in longevity as the denomination increases. The largest denomination (the ten thousand) lasts almost indefinitely.

Of course, the long life of a $10,000 certificate is attributable to the fact that it is handled very little. There is such a universal use of ones that there is a constant and great demand for them by the banks. Over half of the number of notes and certificates in circulation are of $1 denomination.

On June 1, 1931, there were just about 487,000,000 ones in the hands of the public. The demand for twos is quite light, and only 26,000,000 of them are in use, whereas there are 153,000,000 fives, 132,000,000 tens, 72,000,000 twenties, 6,000,000 fifties, and 4,000,000 hundreds. There are but 227,000 five hundreds in use, whereas there are 209,000 of the $1,000 denomination. There are 5,352 of the $5,000 denomination in circulation and 8,461 of the $10,000.

Of the issues in the $10,000 denomination, 4,000 were of the greenback class. The records disclose that 3,999 of the 4,000 have been redeemed. The one shown by the records to be outstanding is, as a matter of fact, in the Treasury vaults and is a part of the available cash balance. It has been retained as a part of the Government's currency exhibit.


An odd notion prevails among many persons that some sort of evil accompanies a $2 certificate. Whatever it is that has given rise to the thought that ill luck is apt to befall the possessor of a $2 note, it is a certainty that the notion is very widespread.

There is another similar notion, just about as sensible, that if the holder will tear a corner off the $2 note the god of ill luck will be more apt to overlook the fault that supposedly attends its possession.

The latter notion or superstition is quite an expense to the Government, for a great many $2 bills that would otherwise be fit for further circulation have to be retired on presentation because they have been thus mutilated.

It is often asked why the Treasury issues the twos when it is obvious that they are not popular. The answer is that they are issued because it is economical for them to be in circulation. Clearly, a $2 note in use saves the use of one $1 note. That is, it takes the place of and does the work of two ones—an obvious saving of the cost of one note. As it costs about a penny to manufacture a note, it is good management for twos to be in circulation, notwithstanding the mutilation just described.


The question is often asked also what use there is for a $10,000 certificate. They are used by clearing houses, by banks, and in certain large real estate transactions. They are issued for reasons of economy; for example, it is a great timesaver for a bank, when presenting a great package of checks to the bank on which the checks are drawn, to be paid the comparatively large sum with a few large instead of many small bills. It saves the time and effort that payment in small denominations would entail. It is likewise an economy to the Government for large denominations to be used, for it reduces the number of notes in circulation, saves manufacturing costs, and reduces counting costs in the redemption process. Clearly, the fewer notes used the fewer there are to wear out. Also, there is much less clerical expense in the Treasury involved in redeeming one $1,000 note than in redeeming one thousand $1 notes.


There have been many inquiries as to why the Government withdrew the large-sized currency from circulation. There were two substantial reasons for doing so. One was that the large size was unnecessarily expensive, since one-third less material is necessary to manufacture a small-sized note. The other reason was because it was desired that all notes of the same denomination should be identical, as far as possible, as to the engraving details. It was appreciated that the several classes of currency could be made quite readily distinguishable by having variances only as to the legends they carry and as to differences in the color of the seals printed on them.

Each class carries its distinct color of seal and the legend that recites what the Government promises.

There is no necessity for any variations on the reverse side of notes that are of like denomination.

If one will observe the $10 notes, for instance (whether they be bank notes, gold certificates, or any one of the several kinds of paper money), it will be observed that they all now carry Secretary Hamilton's portrait and that a picture of the Treasury is on the reverse side.

Similarly, the $1 note carries the portrait of Washington; the two, of Jefferson; the five, of Lincoln; the ten, of Hamilton; the twenty, of Jackson; the fifty, of Grant; the one hundred, of Franklin; the five hundred, of McKinley; the one thousand, of Cleveland; the five thousand, of Madison; the ten thousand, of Secretary Chase. Thus the denomination is disclosed by either the portrait or the index. This arrangement is a protection to the public against the raising of the denomination. The small-sized currency is so designed that it is practically impossible to make a fraudulent change in the index of the bill. It is, of course, the duty of the Government to use all reasonable means to protect the public against such frauds. The fact that the reverse side of all small-sized notes of like denomination is identical permits mass production at reduced manufacturing cost.

With nearly 900,000,000 notes and certificates in circulation, it was a heavy task to accomplish the exchange of the small for the large-sized notes. It required about nine months (from July, 1929, to April, 1930) to reach the point where redemptions were about normal again. Paper-currency redemptions normally take place at the rate of close to $10,000,000 a day. During the substitution of the small- for the large-sized paper the redemption of notes for several months aver-aged fully $25,000,000 a day. Since April, 1930, the volume of large-sized notes coming in for redemption has diminished rapidly. On June 1, 1931, about 91,-800,000 large-sized notes were still outstanding. That number was about 10 per cent of the total number of notes and certificates in circulation. Their face value was about $684,000,000—hence, expressed in terms of dollars, about 13 per cent of the large size was then out. The large-sized notes will be presented for redemption in less and less volume as time passes. Some, no doubt, will still be coming in fifty years from now.

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