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I must jump in!

My eye caught an interesting point from Kush. I must jump into the ring
and contest its validity (for whatever it is worth)...

On Thu, 27 Aug 1998, Kush Khatri wrote:

>  You may ask you do not see the issuance of currency up
> there. That was taken care of by the constitution where the authority
> to issue currency was given to the Federal government.  The Congress
> delegated that authority to the Treasury department.  It will require
> a constitutional change to privatize that function.  

This is perhaps incorrect. I remembered seeing some ancient US currency
issued by some private banks, in the Los Angeles Natural History Museum,
and lo and behold, this is true. There is nothing - to the best of my
knowledge and based on a quick reading of this material (cited below) - in
the US constitution about currency. Check out this info, collected from:


Instead, I learn that there were 8,000 private banks issuing currency in
the USA till the Civil War. Kush: let us get facts as straight as
possible. Always. I may be wrong on some of these things; please do
correct me.  SS

(By the way: the points suggested by Kush and Suresh have all been put up
on the web in the respective places: not yet fully sorted, but will be,
in due course. Also, Arvind wrote about some corrections of his points
that I needed to make on the web page. Done.

Kush: Is it possible to rephrase the points you sent in, so that they are
more general, and not the way USA has defined them? We can debate later,
when we reach those points.)


A Brief History of Our Nation's Paper Money
By Karen Flamme 

[P]aper money ...  was not issued ... by the federal authorities until the
Civil War when the Federal government first issued paper money.  T

BFree Banking Era

In 1791 the Bank of the United States received a charter to operate until
1811, followed by the Second Bank of the United States from 1816 to 1836.
These two banks, chartered by Congress rather than a state, performed
several central bank functions. Although privately owned, they were
authorized to issue paper bank notes and serve as the fiscal agent of the
government. Both banks, however, were unpopular with those wanting easy
credit--primarily the western, agrarian interests--and in 1832 Andrew
Jackson vetoed the recharter of the Second Bank.

Thus followed the "Free Banking Era"--a quarter century in which American
banking was a hodgepodge of state-chartered banks with no federal
regulation or uniformity in operating laws. State Bank notes of various
sizes, shapes, and designs were in circulation. Some of them were
relatively safe and exchanged for par value and others were relatively
worthless as speculators and counterfeiters flourished. By 1860, an
estimated 8,000 different state banks were circulating "wildcat" or
"broken" bank notes in denominations from = cent to $20,000. The nickname
"wildcat" referred to banks in mountainous and other remote regions that
were said to be more accessible to wildcats than customers, making it
difficult for people to redeem these notes. The "broken" bank notes took
their name from the frequency with which some of the banks failed, or went

(Wow!! 8000 banks were issuing currency in USA ! )

Civil War

Once again the need to finance a war provided the impetus for a change in
the monetary system. In 1861, to finance the Civil War, Congress
authorized Demand Notes--the first issue of paper money by the government
since the Continentals.  These Notes were printed in $5, $10, and $20
denominations, redeemable in coins on demand, and green in color--hence
the name "greenbacks." A total of about $10 million was issued, a
relatively small series. These notes, and all paper money issued since
1861, are still valid and redeemable in current cash at face value. While
most early money is now in the hands of collectors or museums, it is
important to note the record of currency stability which this represents.

In 1862, Congress discontinued issuing Demand Notes and issued Legal
Tender Notes, also known as United States Notes. These new notes--issued
in denominations from $1 to $1,000 (later $5,000 and $10,000)--were the
first national currency used as legal tender for most public and private

(blah blah ...)

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