U.S.Paper Money ENG.pdf

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PowerPoint Presentation
U.S. Paper Money
November 2004
Presented by:
Eric Leonard
Past President
Crescent City
Coin Club
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What is paper money?
Paper money is a promissory note. Unlike precious metal coins (such as gold or
silver), the paper itself has no intrinsic value. The value of paper money is the
purchasing power commanded by the issuing agency, in this case the United
States federal government.
In fact, the coins we use today are not made of precious metals and thus have no
intrinsic value. Therefore, modern “business strike” coins are nothing more than
symbols of their face value.
Why use paper money?
Paper money has advantages and disadvantages.
1) Inexpensive to produce… even the cheapest coins
take valuable metals out of the economy.
2) Convenient to use… more purchasing power can
be in your wallet as paper money versus coin.
1) Counterfeiting… unauthorized reproduction,
which is a crime.
2) Depreciation… reduced value compared to
other exchange medium such
as goods, coin, or different
paper money.
3) Inflation…over issuance, the
overproduction of paper
money without backing.
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How old is paper money?
Paper money was first printed in China during the Ming
Dynasty in the 14 th century. Marco Polo (1254-1324)
brought news of Chinese paper money to Europe. But
European leaders thought that mere promises to pay were
too great a step for economies based on gold and silver
On the other hand, it was becoming increasingly common
for gold and silver coins to be debased, or made with less
precious metals and/or cheaper metals.
Ming Dynasty note,
circa 1300
As early as the 4 th century, the Roman Empire was minting
degenerate coins. The practice continued and spread until
the bank of Stockholm in Sweden printed the first European
banknote in 1661. Printing a note was cheaper than minting
a coin, and both were nothing more than promises to pay the
bearer in gold or silver upon demand.
Early Swedish bank
note, 1717
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Is paper money really made of paper?
Originally, yes. But the better paper was mixed with linen cloth to produce a
high grade paper that was more durable.
Paper in various forms dates back to the ancient Egyptians and their use of
papyrus, a water plant that was dried and pressed together. Later, dried sheep
skin was used, which we know as parchment.
Today, U.S. paper money is ¼ linen and ¾ cotton. If you look closely, you can
see the red and blue fibers of cloth in our paper money.
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