Some U.S. Currency questions from a newbie

[Prethen]

As I get deeper into the Friedberg book (I'm over halfway done now), I keep on coming up with more questions. Care to take a stab at one or two?

 

1. The early notes noted that they weren't good for payment of duties or interest on the debt...why? What was able to pay such amounts, just real gold and silver?

2. Why were notes from newly charted banks necessary? What incentive did a bank have to create such notes? Wasn't the government still producing notes regardless of these bank notes? Were these bank notes good anywhere in the U.S.?

3. I'm utterly confused by the fact that there seemed to be considerable overlap in the production of various series of notes. I could be wrong about this and perhaps the government and banks weren't really producing the same denominations at the same time in various series, but it certainly seems the case. There were national bank (charter) notes, silver notes, gold notes, reserve notes, etc. The only note that seems to make some sense were the California gold notes due to all the gold transactions going on there.

4. In connection with above, why were silver certificates produced at the same time that FRN's were produced?

5. Friedberg uses the terms "Rare", "Extreme Rarity", etc. all over the place, but never truly explains them. For instance, in coins, "Rare" literally means (Sheldon scale) less than 100 exist. Sometimes, the book points out when only a few or more are known and state a number.

6. Is there a reference, free or not, that takes an educated guess as to surviving populations of various notes?

7. What's up with Obsolete Notes? I was kind of hoping this book would have mentioned them, but there's not even a paragraph (that I could find) about them. He does state in the Legal Tender paragraph that all past legal tender and obsolete notes are still good today. But, I have a feeling he's not referring to the same "Obsolete Notes" I'm asking about. Why is there no mention of these bizarre $3, $4, $9, etc. notes? Is there a definitive reference for them? Are they truly obsolete, as in, the are not legal tender today?

8. If a bank became "broken", what happened to the notes it produced? Did they become worthless? Weren't consumers paranoid of that happening? Wouldn't a consumer try to get a note produced directly based on government funds instead (reserve note, etc.)? Was there any special assurances banks or government gave to soothe a customer's paranoia?

 

Thanks in advance for any clarification and responses.

[truthteller]

I'll answer the first one.

 

1. The early notes noted that they weren't good for payment of duties or interest on the debt...why? What was able to pay such amounts, just real gold and silver?

 

 

 

If you are talking about early pre 1860's notes issued by independent banks and businesses, here's a reason. Banks and businesses issued notes, backing them with land, specie, or bonds. There was US no government backing the notes, and only the faith of the issuer was your promise to get paid, much like a check. At times, the notes were overexposed and not enough collateral was backing the notes, so if a large group of people came to the issuer and demanded coin, or if the issuer printed too many notes(which was often the case), there would be a run on the bank or business to collect, often forcing the bank or business into insolvency. Banks were often loosely chartered by individual states and often with little or no oversight, so bankruptcy was normal. Thus, to pay government duties, you had to use "real" money, silver or gold. Interest was complicated, since a bank or business issuer could not pay percentages of debt, or mere pennies, in notes.

 

 

 

TRUTH

[Omega32-migration]

In answer to question number 6 regarding surviving populations, the closest thing I can think of is the Martin Gengerke census of large size notes. This census (only get the CD version, not the printed one ) tracks large size notes that have been thru the auction houses over the past several decades, giving grades and prices realized. You'll find it somewhat of a shock to find out that notes can go from XF to AU to Gem Uncirculated from one auction house to another, or ending up in CGA holders in lofty grades.

 

The census also includes a rarity report listing the known number of notes for each Friedberg number - known as in sold via the auction houses, or reported to Gengerke by various individuals. This is about as close as you can get to getting an idea of the surviving numbers. I find this very helpful when trying to determine how tough a note would be to obtain, and, using the past prices, trying to determine how much I will have to pay.

 

No large size collector should be without the census. It's available from R.M. Smythe for $125 - dirt cheap compared to the money I've saved by NOT buying processed notes. I recall a particular 1890 $2 Treasury Note sold at auction as an XF that ended up in a CGA 66 holder - no big deal, only about a $7000 dollar difference in price......

 

I just ordered my third census from him last Friday.

 

The only other census I know of that is current is for 1929 FRBN star notes, kept by Jhon Cybuski.

[Omega32-migration]

Also, a stab at number 5 regarding rarity. While the Sheldon scale is used by the TPG's to grade currency, it has no comparison to paper in regard to rarity.

 

I know little about coins, so I must take your word for it that Sheldon considered anything less than a hundred as "rare". Paper is rare compared to coins in general, as there were far more coins made than notes. Additionally, paper is far more fragile than metal, so it's durability to even survive is somewhat limited.

 

With this in mind, supply and demand comes into play. There are far more coin collectors than currency collectors. If paper had the same collector base as coins, I could retire tomorrow. My own meager collection has one note where the pop is 7, one in the teens, two in the twenties, about a half dozen where the pop is around less than 90. At one time, I owned 4 of one particular Friedberg #, which gave me 12% of the known notes! I still have 3.....

 

So "rare" becomes a bit subjective. In just numbers, paper is most often many times "rarer" than coins. An example I like to use is that of the 1909-S VDB, mintage of about half a million. Go to any decent sized coin show and you'll find a dozen - there's probably that many on Ebay this week. Contrast this with an 1875 $2 Series "A", Fr-45 - one million print, less than two dozen survivors. And 2 of those are in museums.

 

I could cite several other examples, but I think you get the idea. And these are just simple numbers, i.e., how many exist. Grade rarity becomes a whole different issue.

[gnat-migration]

The problem with Friedberg is that it is merely a catalog of notes and provides practically no useful "information" as to the whys or wherefores of US Paper Money. (It is only good to know what the Fr.# is for large size US Notes). No one uses the numbers for small size (and the small size info is woefully incomplete).You should buy a work or works that discuss the various types of US currency which will provide answers to these and many other questions you may have.

 

Though Hessler's book (Comprehensive Catalog if US Paper Money) is better in this regard, it really does not go into depth. Better would be Carlson Chambliss, US Paper Money Guide and Handbook. Even seasoned collectors will find some valuable info (even if Chambliss' tone is somewhat pompus). It is actually a fine reference book. I'd recommend buying it. If you want to collect small size notes (need a catalog), Oakes/Schwatrz Small Size US Paper Money 1928 to date is THE catalog to get.

 

 

2. Why were notes from newly charted banks necessary? What incentive did a bank have to create such notes? Wasn't the government still producing notes regardless of these bank notes? Were these bank notes good anywhere in the U.S.?

 

Don Kelly's "National Bank Notes" is the definitive text on Nationals, and has a very nice history, financial explanantion of how chartered banks made money on issuing notes, explanation of the various types, and of course, listings of notes by banks(ans serial number on CD) and prices.

 

The very very very short version....

 

The national bank act of 1863 was largely intended as a means to help finance the civil war (and provide for more currency in circulation). It also eventually spelled the doom to Obsolete (broken bank) notes to which you refer..which were taxed out of existence. Nationally Charter Banks could issue currency which was backed by Federal Bonds purchased by the bank and held by the Tres. as security for redemption of the Bank's notes.

 

After the National Bank Note issuing period ended (in 1934), the US Goverenment eventually took over responsibility for the few remaining notes redemption. As such, they remain legal tender to this date.

[PAT75]

I collect fractional currency and use the PMG population report to judge rarity. IFor fractionals the most common notes have fewer than 1000 certified, most varieties are less than 100. My benchmark for rarity is 20, any fewer than that I consider rare.