Our word for money is derived from the Latin word moneta, a word
means to warn. This then became associated with the Roman Goddess Juno,
the goddess of warning and finances whose temple in the Roman Forum was
the site of the first Roman mint.
The issuing of paper money is believed to have originated in the T'ang
Dynasty of China about 650 A.D. This Fei'-ch'ien or so called flying
money was introduced to ease the carrying of large amounts of heavy coin
as opposed to the same value in paper. Some scholars feel the fei'-ch'ien was simply a draft used by merchants, and that it wasn't until
1024 A.D. (the Song Dynasty) that the Chinese government officially took
over the job of actually minting legal tender paper.
U.S. RARE CURRENCY HAS BECOME AN EXPLOSIVE GROWTH INVESTMENT
Since the sale of the famous Grinnell collection in the mid-1940s, what
was once a neglected hobby has turned into a major and serious form of
investment. Over the past 43 years, select U.S. currency portfolios
have soared to 50 times their original value as compared to the Dow
Jones Industrials 19.5 times. From 1991 alone, a number of independent
sources substantiate an explosion in rare American paper currency
prices. For example, The Currency Dealer Newsletter reports that a
crisp, Uncirculated, 1861, $5 Demand Note, worth $4,300 in 1992, has
risen to $11,500 today. Or consider a Gem, Uncirculated 1899 $1 Black
Eagle Silver Certificate that could be obtained for $160 in 1992 is
currently hard to locate for less than $400.
The reason behind these continuing price movements is simply the law of
Supply and Demand. Currently, demand is far outstripping supply. The
actual rarity of this asset is difficult to imagine-only a limited
number of specimens have survived to this day. In addition, many of the
40 million U.S. investors in Tangible Assets are just starting to
investigate the rewards of rare American paper money. This escalation
in demand coupled with a fixed supply has been a defining factor forcing
DESPITE SEVERAL INDEPENDENT INDEXEX VERIFYING THE TREMENDOUS
APPRECIATION OF U.S. CURRENCY, DECADES OF PAST GROWTH CAN NOT GUARANTEE
FUTURE RESULTS. EVEN THOUGH RARE NOTES ARE LIMITED IN SUPPLY AND DEMAND
IS SUBSTANTIALLY INCREASING, NOT ALL CURRENCIES HAVE APPRECIATED AT THE
SAME RATE. NO REPRESENTATION CAN BE MADE THAT TODAY'S INVESTOR'S
PORTFOLIO WILL ACHIEVE SIMILAR RESULTS.
This purpose of this is to give the beginning investor or
collector a comprehensive guide to enter this exciting market. Aside
from their historical significance and artistic beauty, rare American
currency is also being used by many for wealth building and portfolio
risk management. Regardless of one's primary intent, both groups
acknowledge these notes as a link to their past and an endowment for
their family's future. Which ever your path, as an investor or a
collector, this article will be a definitive guide helping to form the
framework of your success.
AMERICAN PAPER MONEY
BEFORE THE CIVIL WAR
COLONIAL PAPER MONEY (1710-1775)
In desperation and needing to fund the new war with the French Colonies in
Canada, an impoverished England first authorized the Massachusetts Bay Colony to
print Bills of Credit in 1690. Thus, gradually in pre-Revolutionary
America, each colony began to print its own form of currency. The first
was issued by Rhode Island in 1710 with the other Colonies following suit up to
the Revolutionary war. It is from these Bills of Credit that today we
derive the term bill in reference to individual pieces of money.
CONTINENTAL CURRENCY (1775-1782)
To finance the American Revolution, and because the Colonies were powerless to
tax, the Continental Congress authorized the first actual American Currency on
May 10, 1775. Not having bullion backing and easily counterfeited,
continental notes were worth only 2 1/2 cents to the dollar in 1780. Thus began
the phrase, not worth a Continental.
In 1791 Congress chartered the First Bank of the United States. This
organization was empowered to serve as the U.S. Treasury's monetary agent until
1811 and carried the primary functions of today's Federal Reserve. As a
single issuing source, its primary goal was to stabilize the nation's debt
structure and simplify trade. A year later in 1792,
the first U.S. Mint was created in Philadelphia.
VARIETY NOTES (1770-1866)
By 1836, banks in the United States had swollen to over 1,600 in number. With
scant regulation, these state- charted, private banks ran wild issuing over
10,000 Variety Notes of various design, color and size. Known by a number of
names, Obsolete Notes, Broken Bank Currency, State Bank Notes or Private Bank
Notes, not only was counterfeiting relatively easy, but the entire system was
further complicated by rampant bank failures.
LARGE SIZE U.S. CURRENCY
DEMAND NOTES (1861)
During the Civil War, both the North as well as the South developed their own
currency. Ripped apart by war and teetering on bankruptcy, Congress
ordered the printing of a number of notes. These Large Size Notes were
commonly called horse blankets because of their dimensions. Issued from 1861 to
1928, their original size was approximately 7.42 inches by 3.13 inches.
Cost cutting measures have reduced today's note to the more familiar 6.14 inches
by 2.61 inches. Demand Notes or Greenbacks, minted only in 1861, represent
America's first type of Federal Bank money.
LEGAL TENDER NOTES or U.S. NOTES (1861-1928)
Also referred to as United States Notes, these were issued from 1861 on into the
20th Century. Denominations ranged from $1 to $10,000.
INTEREST BEARING NOTES (1861-1865)
The rarest of all U.S. Notes, the Interest Bearing Note paid regular rates of
interest as well as the note's stated value for a period of one, two or three
years. With the Civil War raging, it is no wonder that once a bill became
due and payable it was immediately redeemed, taking it out of circulation
NATIONAL BANK NOTES (1863-1928)
In 1863 there still was a problem in stabilizing the value of our currency.
Since over 75 percent of all bank deposits were held by nationally charted
banks, national Bank Notes backed by U.S. government securities came into being.
This lasted until 1928.
COMPOUND TREASURY NOTES (1864-1865)
From 1864 to 1865, the United States minted a note that not only paid its face
value but also a rate of 6% interest that was compounded twice yearly.
GOLD CERTIFICATES (1865-1922)
To shore up and create greater confidence in our currency, Gold Certificates
were issued against U.S. gold holdings by the Department of the Treasury from
1865 until 1922. These are the most colorful and
brilliant currency ever minted in America. Their reverses are a vivid, flaming
golden orange symbolic of the coin for which they were created.
SILVER CERTIFICATES (1878-1928)
Beginning in 1878 and continuing through seven series, Large Size Silver
Certificates stayed in circulation until 1923 with the smaller size remaining
until this day. The Government stopped redeeming them for silver bullion on June
REFUNDING CERTIFICATE (1879)
To build confidence in our nation and to strengthen our government securities,
Congress passed the Act of February 26, 1879. This granted the authorization of
issuing Refunding Certificates of a $10 denomination with an additional interest
payment of 4% per annum. The act was later repealed and interest payments ceased
on July 1, 1907.
TREASURY NOTES (1890-1891)
Also called Coin Notes, Treasury Notes were issued from 1890 to 1891 and were
redeemable in either gold or silver coin.
FEDERAL RESERVE BANK NOTES AND FEDERAL RESERVE NOTES (1915-1918)
Backed by government securities, Federal Reserve Bank Notes were issued from
1915 to 1918 and are thought by many to represent one of the highest art forms
in American Currency. Also issued in denominations from $5 to $10,000 under the
same Federal Reserve Act, Federal Reserve Notes have an important dissimilarity.
These were notes not issued by the banks themselves as were the Federal Reserve
Bank Notes. Consequently, the obligation to pay the bearer was strictly on the
government and not the banks.
A CHANGE IN SIZE
Starting with the reduction in currency size in 1929, the United States
Government has minted over 1,200 issues of currency - Legal Tender Notes; Silver
Certificates; National Bank Notes; Federal Reserve Notes; World War II Emergency
Notes; Gold Certificates; and Military Payment Certificates. Many of these
varieties are being printed yet today.
WHAT DETERMINES THE VALUE OF A NOTE?
Rarity in its normal usage is an indication of the quantity in existence. This
coupled with the state of preservation are the
primary considerations determining the value of a note. In notaphilistic terms,
the rarity of a note has more specific meanings, such as-
(1) COMMON - common is a term notaphilists use to describe an easily
obtainable note. This is something that is
available without requiring much effort in its location;
(2) SCARCE - this is often a common note which is infrequently seen and
cannot be instantly obtained from most dealers.
This type of note is most frequently seen at currency shows or auctions;
(3) RARE - the designation rare is often overused by a number of dealers.
To be truly rare means that this type of
note has surfaced only a few times in a year at public auctions.
(4) VERY RARE - very equates with the word ultra. Here is a note that may
only come into public view once every decade; and
(5) UNIQUE - means only one example known.
A NUMERICAL RARITY SCALE
In a more defining sense, rarity has been given a numerical rating.
R-10 1 to 2 notes known
R-9 3 to 4 notes known
R-8 5 to 6 notes known
R-7 7 to 9 notes known
R-6 10 to 12 notes known
R-5 13 to 15 notes known
R-4 16 to 20 notes known
R-3 21 to 35 notes known
R-2 36 to 50 notes known
R-1 over 50 notes known
STATES OF PRESERVATION
Aside from rarity, the physical condition is one of the most important issues in
determining the value of a note. As an example, A Very Good note will command a
much lesser price than one which is graded, Fine or Very Fine. In determining
the state of preservation, a number of factors are taken into consideration.
Above all else, eye appeal is the most important. A few of the other factors
are: folds; creases; accumulated dirt; a rippling of the paper due to moisture
absorption; fading; tears; stains; edge trimming; large holes; foxing; damaging
thins; cuts; the effect of washing; rust stains; missing pieces; staple
perforations; foreign matter stuck to a note; and graffiti.
Here is a brief discussion of how these factors determine a specific grade.
1. GEM CRISP UNCIRCULATED (GEM CU) - A Gem Cu is a virtually flawless
note, perfectly centered, balanced margins and as crisp as the day it was
minted. It can have no evidence of handling, no surface marks acquired after
printing, no folds, no pinholes, no ripples or bent corners.
2. CHOICE CRISP UNCIRCULATED (CH CU) - This is not an absolutely perfect
specimen. It may be slightly off-
centered, but still with nice margins, have tiny foxing, slight smudges such as
teller handling marks or tiny pinholes if only visible through inspection with
black lighting. It must be of original color with no major stains, no rippling
and no bent corners.
3. UNCIRCULATED (UNC) - Plain Uncirculated is often the highest grade
given by dealers to a foreign currency. Uncirculated does not mean that a note
has never been in circulation or handled. Rather it points to the fact that the
currency has not been folded and shows no evidence of mishandling as is common
with notes with daily trade use.
4. ABOUT UNCIRCULATED (AU) - About or almost uncirculated notes may have
one light fold through the center or several light corner folds that pass
through the printed or design area. It may have no creases or breaks in the
paper fibers, the corners may not be rounded, but may or may not have small
pinholes, small stains, slight smudges and or a rippling effect.
5. EXTREMELY FINE (EF OR XF) - This note may contain three light folds
through the primary body of the note or one major crease with the corners and
edges still sharp. However, it must still be crisp, clean and with bright
colors. It may not have
major stains or tears.
6. VERY FINE(VF) - Collecting or investing in this or lower, less
preserved notes may not benefit the purchaser. With
extremely fine there may be three major creases or one major crease and a number
of lighter creases throughout the note. In addition, it may have on it some
dirt, loss of crispness is acceptable as well as a slight rounding of corners
and gently faded colors. In addition it may have edge wear, but no tears into
7. FINE (F) - This bill may have many folds and creases, tiny surface
abrasions, but no center hole due to folding. It also may have staple holes,
slight faded color, but may not be excessively dirty. Also it may bear no
serious tears, stains, major holes or missing corners.
8. VERY GOOD (VG) - Here you have significant wear, faded color, soiling,
rounded corners, edge tears (not into the design), staining pinholes and staple
holes. There can be no missing pieces, nor can it be limp, wrinkled or
9. GOOD (G) - The term Good in the grading of paper currency is almost
the opposite as its use in normal, everydaylanguage.
It means very limp, tiny holes at the crease intersections, small missing pieces
of the main note and missing corners even if slightly entered into the print
design area. It also may contain major stains, graffiti, frayed margins, surface
abrasions along the creases and so forth.
10. POOR - This is the lowest determination of a grade. It represents a
bill that is severely damaged with large pieces
missing, excessive surface wear, large holes, major stains, trimmed edges and
graffiti. This type of bill is instantly withdrawn from any bank in which it
TRACKING THE VALUE OF NOTES
There are a number of indices that track the value of rare U.S. currencies. The
most current prices are those derived from currency auctions. While normally
reflecting wholesale value, these are valid from the moment the gavel hits the
table. It is common practice for auction houses to furnish, upon request, a full
printout of all currencies sold at that proceeding.
For retail figures, one of the most comprehensive and reliable sources is Robert
Friedberg's PAPER MONEY OF THE UNITED STATES. By many, this has been considered
the bible or bench mark of current values. For over 43 years, the Friedberg's
have been doing an extraordinary job of forecasting all major traded U.S.
currencies at their various grades.
However, in a fast moving market, many listed prices may be substantially less
than actual current market value.
RISKS OF THE CURRENCY
Due to the extreme vigilance of the U.S. Secret Service, counterfeiting is
virtually non-existent in rare notes from 1861 to 1928. However, it does occur
in some Colonial, pre-Revolutionary, Confederate and Broken Bank Note
Currencies. This does not mean that these should be avoided. Rather this is a
primary reason to deal only with large companies, and only those who hold a
fidelity or honesty bond.
1. ALL COLLECTIBLES ARE SUBJECT TO CHANGES IN ECONOMIC CONDITIONS. Rare
collectable currency is no exception. If America were to experience a serious
economic turndown, the market for U.S. collectable notes could be adversely
affected. Even with their historical pattern of growth, no assurance can be
given that an investor will be able to liquidate at a value higher than the
original purchase price.
2. LIQUIDATION IS NOT INSTANTANEOUS. As in the Equities Industry, currency must
be taken back into the market and either sold to your dealer, placed on
consignment and sold to a dealer's clientele, liquidated at auction, sold
privately or at a currency or numismatic convention. While the possessor of
currency has a liquid commodity, its sale is seldom instantaneous.
3. PAPER NOTES ARE DELICATE IN NATURE and can be easily destroyed or devalued.
Direct sun exposure, moisture, handling out of the holder, odors, excessive
dust, etc., all can devalue or even destroy your currency.
4. GRADING RISKS - the value of a note depends not only on the number in
existence, but its state of preservation or grade.
Minor differences in appearance can also affect the value of a note and its
liquidation potential. And while grading is not difficult to learn, it is a
subjective process and there may be disagreement from one party to another. This
is another reason for dealing only with the largest of firms who have a
specialty in the Currency Field.
5. MARKET CYCLES ARE ANOTHER AREA OF RISK. Currency as with other commodities
can experience periods of volatility. These rapid increases and decreases in
value cannot be accurately predetermined. For this reason one should be prepared
to hold their portfolio for a minimum of 5 to 7 years.
6. STORAGE TRANSPORTATION AND EXHIBITION RISKS - due to the delicate nature of
paper currency coupled with their liquidity as an asset, effort must be taken to
insure proper and safe storage as well as transportation.
7. THE CURRENCY MARKET IS NOT REGULATED BY THE U.S. GOVERNMENT and is not
subject to the scrutiny of the Security and Exchange Commission or Banking Laws.
Like rare art and antiques, currency sales are controlled by general law rather
than those imposed upon a specific industry. As a result, the investor
protection benefits of
governmental regulation afforded to other type of investment are not applicable.
8. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. In addition, some notes
have performed much better than others. For that reason, there can be no
assurance that an individual portfolio of notes will be profitable. Regardless
of one's enthusiasm based upon anticipated return, the Currency Market is
unregulated and like all investments,
contains elements of risk. Currency Investors and Collectors should be prepared
for the possible loss of some or all of their investment. Any investment has
both positive and negative qualities. It is for this reason that a potential
purchaser is recommended to review these points carefully. As an example, while
the market has recently made considerable gains in growth, there can be
unexpected downturns. Therefore, investment in this asset is not suggested for
those who seek current income but rather long term appreciation or enjoyment.
HOW TO BUY AND SELL U.S.
BUYING FROM AUCTIONS
Circumventing a dealer and purchasing directly from auctions is one of several
options available to anyone interested in acquiring currencies. As with any
method, there are both advantages and disadvantages when attending an auction.
First the advantages - you often find a higher quality and scarcer variety of
notes at auction than you will at a currency convention; prices, providing you
don't over-pay, normally reflect true market value; the currency often comes
(pedigree); and in selling you may be able to state that a particular note came
from someone quite famous.
There are several disadvantages of buying at auction. The first is getting
caught in a bidding frenzy and paying far in excess of what a note is worth.
Another serious problem is that unlike buying through a reputable dealer who
offers a return privilege after the sale, most auction sales are final. There
can be no buyer's remorse. The lack of return privilege also surfaces should you
make a mail order purchase
based upon a catalog description and after inspection find that you are in
BUYING AT A CURRENCY OR NUMISMATIC CONVENTION
Another avenue of purchase is to acquire notes at currency and rare coin
conventions. As with the auction, if one is aware of the various grades of
quality and the general pricing, the bourse (the name given to the transaction
area) is an excellent place to acquire rare currency. Unfortunately, until he or
she is better educated, the novice may pay far in excess of the actual worth of
a note and or be persuaded to acquiring a less than desirable grade of product.
Note, most dealers do not offer a return privilege for notes bought on the
bourse floor at conventions.
CHOOSING A BROKER - THE MOST IMPORTANT CONSIDERATIONS
EXPERIENCE AND SPECIALIZATION
While the number of years a dealer has been in business is used by many a
consumer as THE yardstick in selecting a broker, that is not nearly so important
as their EXPERIENCE and SPECIALIZATION. Seek major, international companies that
have years of specific experience in the Currency Industry. This type of firm
normally has several advantages: In-depth educational programs; individualized
service; greater financial stability; and very importantly, competitive pricing
due to their power
to buy in quantity.
Beware of firms offering little or no written information about themselves and
their product(s). This does not mean that big and
glossy is better. Make certain that the information is there and that it hits
all the notes - location of business; specialization in the industry; steps in
purchasing; what additional services and educational programs they offer; how to
independently track the value of your notes; steps of liquidation; and what to
do if you are dissatisfied.
AVOIDING HIGH-PRESSURE TELEMARKETERS
Telephone solicitation is acceptable ONLY if it falls within certain guidelines.
Beware of firms that approach you without your having requested them to do so.
Note that new Federal guidelines prohibit telemarketing companies from
contacting you later than 9 P.M. Ask for literature and the time to make an
A FIDELITY BOND GIVES YOU SAFETY
A Fidelity Bond is an assurance that the currency you receive is of equal or
greater value than the money you sent for its purchase. Likewise, when you offer
your currency through a broker for liquidation, the insurance company guarantees
you that you will be receiving cash back equal to the liquidation price. It is
perfectly acceptable to ask your broker for the name and phone number of his
bonding company. In this way you can verify that the bond is both valid and
AVOID A GUARANTEED BUY-BACK
Many investors and collectors have been disappointed finding the company
guaranteeing a buy-back was not financially capable of doing so. Often this
well-meant but empty promise has been given by even the sincerest of companies.
In any commodity where there is an investment opportunity, there are market
cycles. Upon a major drop in market value, a tidal
wave of sellers come crashing down on a company demanding to liquidate - few but
the largest firms are financially capable of standing against this mountain of
A better alternative is to search for a company that guarantees to liquidate
your currency rather than promising a buy-back. As with stock brokerage houses,
a dealer can easily liquidate your currency through a number of options - either
to its own client base, at auction or even at a currency or coin convention.
CURRENCY RETURN PRIVILEGE
It is best to deal with those firms who offer a return privilege after a sale.
This is the time period given to a customer where he or she may return the
currency for what ever reason and receive a no questions asked refund - two
weeks is a reasonable period. The reader is cautioned to return the merchandise
in exactly the same condition in which it was purchased.
TAKE A CONSERVATIVE APPROACH
Look for a dealer who spends the time to educate and is not pressuring for a
fast sale. Avoid those who promise quick riches, talk in confusing terms without
taking time to explain and want a fast decision. Currency investing can be quite
rewarding if the proper relationship is developed with a legitimate broker.
PRICE LISTS THAT ARE TOO GOOD TO BE TRUE
While most currency dealers maintain a high standard of integrity, the novice is
advised to use common sense - where the purchase prices are values below recent
auction levels; where the dealer is not bonded; and if there is either no return
privilege or the time is too short.
TEN WARNING SIGNS
Unsolicited sales presentation
Little or no literature
Unsubstantiated or exaggerated claims of historical currency performance.
Suggesting that you place all of your investment capital in currency.
Failing to explain the risk factor of such an investment.
Not having a Fidelity bond guaranteeing the security of your purchase or
Guaranteeing a buy-back of your portfolio when a major sell-off would make that
No written return policy or one that is too short if you are dissatisfied with
A price list that is too good to be true with little or no return privilege
Giving unclear answers to specific questions.
SEVEN THINGS TO REMEMBER
1. Be comfortable with your selection of dealers and more important with the
specific person handling your account. Ease in discussing one's financial
situation is critically important.
2. Currency purchases should be made with discretionary income. Make certain all
of your primary financial needs are covered
before venturing into this arena.
3. Never invest more than you can lose.
4. Review the dealer's literature carefully. Write down and ask any question
that is unclear.
5. Do not hesitate in checking the dealer's prices with AN INDEPENDENT, THIRD
6. Get the dealer's guarantee in writing.
7. Be prepared to hold your investment for a minimum of 5 to 7 years.
WHAT TO DO IF YOU'RE DISSATISFIED
Refer to your return privilege. If within the time frame and you are
dissatisfied, simply return the item(s).
If past the time of return, examine the overall guarantee to see if it applies.
Contact the dealer immediately to see if a resolution can be forthcoming.
You may also contact- the American Numismatic Association in Colorado Springs,
Colorado; The Industrial Council For Tangible Assets; or if your currency was
purchased by U.S. mail, the local Postmaster.
HANDLING, VIEWING, STORING
AND SHIPPING YOUR CURRENCY
HANDLING - here are the general steps in handling a note.
1. Begin by washing your hands.
2. Handle the note in a clean area devoid of drinks and food.
3. If the note is encased in a plastic holder and you want closer examination,
take it out ever so carefully. Do so when time is not a factor.
1. Use a strong incandescent light of 100 watts or greater. Florescent lighting
and natural outside lighting are not strong
enough for a proper examination.
2. Observe both sides of the note with back light shining through. This would
show you most obvious defects and paper folds.
3. Rotate the note at different angles to see minimum defects or the rippling
4. Look at the edges to see if they have been trimmed. Do you have clean,
perfect edges on a worn note?
5. Next, lay the note flat on a surface. If it waves then is this from natural
humidity or washing and ironing?
1. It is recommended that all notes be encased in a hard plastic holder for ease
of handling, viewing, storage and shipping.
As mentioned under handling, a note may be removed, but ever so carefully.
Currency holders may be obtained from:
CAPITOL PLASTICS, INC.
628 North Erie Street, P.O. Box 543
Massillon, OH 44648 (216) 832-4287
2. Store your notes vertically, in a plastic protective box in an area free of
light, chemical odors and moisture. Do not use a cardboard container for storage
since it can give off chemicals and dust that will effect the longevity of your
1. Each note must be encased in its individual, hard, plastic holder.
2. Insulate each note well - many use bubble wrap.
3. Always use a rigid box for shipping. For the short duration of transit,
cardboard acceptable. Be certain that the box is new or does not contain any
unusual odors from prior contents.
4. The United States Postal Service is the most often used form of
transportation. Overnight shippers such as
Federal Express, United Parcel Service, etc., will not allow the shipping of
5. Always ship Registered, Insured with a Return Receipt that shows who signed
HISTORY -ART - AN INVESTMENT IN THE PAST - A LEGACY FOR THE FUTURE
Investing and collecting Rare U.S. Currency can be one of the most enriching
endeavors that a person can undertake. As a passport to United States history,
this is a field that is relatively easy to learn and could soon involve the
That few people collected this type of currency when it was first minted
combined with the tendency of paper to deteriorate if improperly handled makes
for exceedingly limited numbers of notes in higher quality. Remember the
admonition, quality over quantity? Starting your program today suggests that a
broader selection of notes at a higher quality should be available than if you
begin sometime in the future.