A Brief History of North Carolina Money
Keeper, North Carolina Collection Gallery, 1986-2008
In his 1977 book The Age of Uncertainty, noted economist John Kenneth Galbraith observes, “Money…ranks with love as man’s greatest joy. And it ranks with death as his greatest source of anxiety.” Money has certainly been the cause of widespread anxiety and social instability in North Carolina’s past, as it has been in other states. Scarcities of coins, overproduction of paper money, short-sighted fiscal policies, inadequate or nonexistent banking regulations, and counterfeiting plagued and complicated the daily lives of our Tar Heel ancestors, often making it difficult for them to buy or sell basic goods and services. It was not until after the Civil War that the United States’ monetary system began to centralize and stabilize under federal authority. Until that development, North Carolina and other states had to depend largely on the uncertain paper moneys issued by their own governmental officials and by private banks and other businesses.
The Colonial Era
Due to monetary and commercial restrictions imposed on the colonies by England (Great Britain after 1707), coinage was often in short supply in many locations in the Carolinas and elsewhere in North America during the 1600s and 1700s. English pence and shillings did circulate in these regions, and there were early efforts in Massachusetts, Connecticut, Maryland, and in a few other colonies to strike or import supplies of coinage to ease shortages. Those efforts, however, proved to be isolated and very limited in scope, so England’s American subjects routinely employed barter in their transactions, directly exchanging food, clothing, tools, livestock, and other items with one another. They also relied increasingly on foreign coins that filtered into their local economies through unauthorized trade and incidental dealings with visitors and new settlers in their communities. Dutch “lions,” French deniers and écus, Portuguese “joes,” and Spanish cobs and milled dollars were among the copper, silver, and gold pieces found inside the pockets, purses, and lock boxes of American colonists
Insufficient supplies of coinage and shortfalls in revenues finally prompted some of England’s “New World” colonies to produce money in another form: paper. Massachusetts was the first colony to issue paper money in 1690 (four years before the Bank of England did so), followed by South Carolina in 1703, and New York in 1709. In 1712 and 1713, North Carolina’s colonial assembly approved the issue of 12,000 pounds in bills of credit to pay for military equipment and supplies during North Carolina’s war against the Tuscarora Indians. Since no printer resided in North Carolina at the time, all of that currency had to be handwritten. North Carolina’s subsequent authorizations of 1715, 1722, and 1729—which consisted of over 47,000 more bills with a combined face value of 76,000 pounds—were also penned entirely by hand.
At first it appeared that paper money might be a convenient, quick solution to the colonies’ financial problems. Unfortunately, the over-production of these currencies and counterfeiting of bills began to erode public confidence in domestic issues. By 1720, bogus money had become a very serious problem in North Carolina. That year Royal Governor Charles Eden complained in a speech to the assembly that the “quantity of counterfeit currency among us” was harming the economy and bringing ruin to “many honest homes and families.” Fourteen years later, Governor Gabriel Johnston echoed his predecessor’s concerns about “the great Multiplicity” of counterfeit bills being passed by “Vagabond and Idle people.” By then, by 1734, North Carolina’s government discontinued its production of handwritten money. North Carolina still had no printer living within its borders, so officials had to contract a craftsman in another colony to produce North Carolina’s authorizations of 1734 and 1735. The use of printed currencies did not stop counterfeiting. Even the adoption of far harsher penalties for the crime did not markedly curb the practice. Legislation passed by North Carolina’s assembly in 1745 required that for a first offense, anyone convicted of forging, altering, or knowingly passing counterfeit bills would publicly “stand in the Pillory for the space of two hours, have his ears nailed to the same and cut off.” After a second conviction, the offender would be summarily executed “without benefit of Clergy.”
North Carolina at last gained the services of a printer in 1749, when James Davis of Virginia moved to New Bern to establish his shop. As soon as Davis had his press set up there, North Carolina’s government assigned him the task of printing the money it had authorized in 1748 to build coastal defenses against possible Spanish attacks. Colonial records document that officials paid Davis half his annual salary on October 17, 1749, for completing the “stamping and emitting the sum of Twenty one Thousand Three Hundred and Fifty pounds [in] public Bills of Credit.” Later, in 1754, the prospects of armed confrontations with French forces and their Native American allies prodded North Carolina once again to issue bills to underwrite the construction of additional fortifications and to equip troops. Problems with these currencies and later bills released by North Carolina and other colonies finally moved the British government to take restrictive actions. Parliament’s Currency Act of 1764 and further legislation in 1773 further tightened London’s control over North America’s monetary affairs and forbade nearly all forms of colonial currency. Prior to the implementation of those controls, in the period between 1712 and its issue of 1771, North Carolina alone had authorized eighteen emissions of paper money that in face value exceeded 343,000 pounds.
During the Revolution, deficiencies in coinage and the accelerating instability of American paper moneys proved to be greater threats to the goal for independence than were British muskets. In North Carolina the provisional government that replaced royal authority had an empty treasury and qualified as a poor risk for any potential loans. Therefore state officials, like their colonial predecessors, had to resort once again to printing currency to supply North Carolina’s troops and to finance other governmental needs. In Philadelphia, the Continental Congress also authorized the printing of currency to cover its administrative and war-related expenses. Over 241 million dollars in “Continental currency” flooded North Carolina and the other states during the Revolution. Unsupported by any reserves of silver or gold, this congressional currency rapidly depreciated, so much so that Americans long after the war used the phrase “Not worth a Continental” to describe anything of little or no value.
With further regard to North Carolina’s currencies in this period, the bills and notes it issued on the eve of the Revolution and during the fight for independence were products of several craftsmen. Silversmith William Tisdale of New Bern is credited with printing the authorization of 1775; Gabriel Lewyn of Baltimore, Maryland, produced the state’s 1776 issue; James Davis, its 1778 issue and two authorizations of 1780; and Hugh Walker of Wilmington, the intervening issue of 1779. Walker, it should be added, produced North Carolina’s 1779 currency, because Davis was unable to print it in New Bern due to a smallpox epidemic in the town and fears that the disease would spread across the region if bills contaminated with smallpox were issued from there.
Overall, North Carolina’s elected officials authorized the printing of more than eight million dollars in currency between August 1775 and the state’s last wartime issue of May 10, 1780. That given dollar amount is misleading, for it is only the total face value of those currencies, not a true measure of their buying power. As in the case of the paper moneys issued by the Continental Congress and other new states, the real value of North Carolina’s currency fell dramatically during the Revolution. By December 1780, North Carolina’s bills were being generally accepted or exchanged at an a rate of 725:1, meaning that 725 dollars in North Carolina currency was equal to only one dollar in silver or gold.
Early Federal & Antebellum Periods (1780s-1860)
After the Revolution, all of the Continental dollars and other paper currencies issued during the war had been thoroughly discredited. Nevertheless, North Carolina’s government still found it necessary to print its own currency in 1783 and again in 1785 to meet its obligations. Public mistrust for paper money, especially for any bills with face values in dollars, prompted North Carolina and several other states to revert to using colonial-era denominations, utilizing the British duodecimal system of pence, shillings, and pounds.
Later, when North Carolina formally ratified the United States Constitution and joined the Union in November 1789, the state agreed to abide by the founding document’s provisions, including its restrictions regarding the minting and printing of money. Article I, Section 10, of the Constitution forbids any state from minting coins or emitting “Bills of Credit” (paper money) or “make any Thing but gold and silver Coin a Tender in Payment of Debts.” Although these restrictions sought to unify the nation’s monetary supply by not allowing states to produce their own money, the provisions did not specifically prohibit private individuals or businesses from doing so. As a result, the vast majority of currency that circulated in the economy between the American Revolution and the Civil War was paper money issued by private banks. The Bank of Cape Fear in Wilmington and the Bank of New Bern, both chartered in 1804, were North Carolina’s first banks and were the first to issue bank notes in the state. Citizens here and elsewhere relied heavily on such bank notes, as well as on other forms of money, such as scrip or “due bills” issued by merchants, private academies, and later by insurance companies and textile mills.
During the early 1800s, North Carolina’s state government was one that appeared to defy openly the Constitution’s restrictions on the production and issue of state-sanctioned currencies. On three occasions—in 1815, 1817, and 1824—North Carolina’s legislature authorized the printing of state treasury notes. The chief purpose of that money was to make it possible for North Carolina’s cash-strapped government to buy bank stocks. Produced in denominations of less than a dollar (known as fractionals), those notes did not remain just within the realm of the state’s banking system; they found their way into the economy, remaining in circulation for many years and being used by citizens to transact business and often to pay their taxes.
Being a relatively poor state with few factories, North Carolina’s small-farm economy grew slowly during the first half of the nineteenth century. The state, along with the rest of the South, therefore, did not require the same levels of capital and expansion in its banking system as those demanded in the industrial North. Despite this, the number of banks in North Carolina did rise steadily before the Civil War. By 1860, there were thirty-six private banks with branches operating in communities across the state. Nearly all of them issued currencies that were printed under contract by engraving firms in New York and Philadelphia. With each passing decade, the selection of bank notes produced by those companies became more elaborate and beautiful, employing more details in their design and more complex uses of color to thwart the ever-improving skills of counterfeiters.
While the first half of the nineteenth century was, numismatically speaking, an era dominated by paper money, that period also witnessed a bona fide “golden age” of coinage in North Carolina. In 1799, the United States’ first documented discovery of gold occurred in the state’s western piedmont, in Cabarrus County. There a small boy named Conrad Reed found on his father’s farm a seventeen-pound rock heavily laced with the precious metal. By the 1820s, large-scale mining operations were in place in the region, with millions of dollars in gold being shipped to Philadelphia for coining at the United States Mint. In fact, prior to 1829, North Carolina furnished all the native gold coined by the national mint.
The inherent dangers of transporting valuable supplies of raw gold to Pennsylvania made it obvious to many North Carolina prospectors and businessmen that they needed the services of local craftsmen who could accurately assay and transform their gold dust, ore, and nuggets into accurate and convenient gold pieces. In response to those needs, both private and public minting operations were established in North Carolina, as well as in northern Georgia during the 1830s. German-born metal smith Christopher Bechtler, Sr, set up a shop in Rutherford County, N.C., in 1830. Initially, Bechtler concentrated on crafting jewelry and watches; but soon he, his son, and a nephew began to use a hand press and dies made in the Bechtler shop to strike coins with the gold that people brought to them. The Bechtlers produced coins in three denominations. a dollar, a “quarter-eagle” ($2.50), and a “half-eagle” ($5).
The success of the Bechtler family’s private coining business and that of private minter Templeton Reid in Georgia were among factors that convinced the federal government in 1835 to found a branch of the United States Mint in Dahlonega, Georgia; one in Charlotte; and another branch farther south, in New Orleans. In North Carolina the Charlotte Mint and the Bechtlers together would coin over eight million dollars in gold before the Civil War.
With the outbreak of war in 1861, North Carolina and the other states that left the Union were no longer bound by the United States Constitution’s monetary restrictions. Yet, the Confederate Constitution, like its federal counterpart, stipulated that “No State shall . . . coin money; [and] make anything but gold and silver coin a tender in payment of debts . . . . ” Such provisions, especially in time of war, quickly proved unrealistic and entirely unworkable. The Confederate government lacked the metal reserves to strike coinage, so from the outset of the conflict, the Confederacy and its constituent states were forced to rely on a mind-boggling array of paper currencies to run the South’s economy and to finance its battle against the North. The Confederate treasury alone issued at least seventy different types of notes that in face value amounted to nearly two billion dollars. This massive volume of paper money was supplemented by a wide range of official state currencies and by hundreds of notes of different sizes and designs distributed by private banks and other businesses throughout the South. This confusing mix of money steadily increased the stresses on the Confederacy’s economy, broke public confidence in the South’s fiscal policies, and hampered the collection of taxes at all levels of government.
North Carolina’s state convention and legislature authorized the printing of $16,420,000 in treasury notes during the war. That dollar amount seems puny when compared to the monstrous sums issued by the Confederate government, but for North Carolina it proved too much. As elsewhere in the South, the strains of war made it impossible for the state’s currency to hold its value. More and more money was needed to buy ever-dwindling supplies of food and other necessities. Between 1862 and 1865, for examples, the price of wheat rose more than 1,600 per cent; bacon soared 2,300 per cent; and flour almost 2,800 per cent. By early 1865, a North Carolinian needed as much as $600 to buy a pair of basic shoes and $1,500 to purchase a simple overcoat. Such exorbitant increases in the cost of living and accusations of profiteering often caused civil unrest on the homefront. Earlier, in 1863, a crowd composed largely of soldiers' wives confronted a store owner in Salisbury about his high price for flour. When the owner dismissed their complaints and brusquely closed the front door of his storehouse, some of the women reopened the door with hatchets. The owner then quickly agreed to provide the ladies with ten barrels of flour at reduced prices.
Growth of a National Banking System
The confusion and financial problems associated with the multitude of currencies used by Americans both before and during the Civil War convinced the federal government to alter and refine the nation’s monetary structure, adopting changes that led ultimately to the creation of common standards for notes used in the United States. During the war, the Union government had also relied on various forms of paper money. National bank notes were one type of currency created by federal officials in 1863. Printed under the authority and supervision of the United States government, those notes were issued to private banks, which, in turn, introduced them into the economy. This new system extended into South after the Confederacy’s destruction in 1865, with the National Bank of Charlotte becoming the first such institution in North Carolina to receive a national banking charter from the United States government. Other national banks opened in the state, as did thousands more throughout the reunified, growing nation. According to Arthur and Ira Friedberg’s 2001 catalog Paper Money of the United States, a total of 14,348 national banks were established in the country between 1863 and 1935. Only 146 of this large number—barely one percent—consisted of North Carolina national banks. Due to this small number of North Carolina national banks, the North Carolina notes that survive from the era usually command very high prices in numismatic markets today.
Money collectors broadly categorize national bank notes into two types: a larger type and a smaller, less ornate type issued after 1928. Regardless of where they circulated, though, all national bank notes of the same type and series look identical in their basic design. Their only minor differences or variations pertain to overprints of the issuing bank’s name, location, and individual charter number. For instance, the Citizens National Bank of Raleigh was the 1,766th national bank chartered, so all of its notes (one of which is illustrated on this page) carry that bank’s title and the bold charter number 1766.
During the decades before the Civil War, another private supplier of money began to issue much-needed coinage from Rutherford County, N.C. German-born jeweler Christopher Bechtler, Sr., his son Augustus, and a nephew coined millions of dollars in gold excavated in the region. Years before the more famous strike in California, North Carolina was home to the United States’ first gold rush. Prospectors swarmed over the state’s western piedmont, where their panning, digging, and blasting uncovered rich surface deposits and winding subterranean veins of the precious metal. In fact, prior to 1829, North Carolina’s mining industry furnished all the native gold coined by the United States Mint in Philadelphia. By 1837, the level of gold production in the state and the Bechtlers’ continuing success prompted the federal government to establish a branch of the national mint in Charlotte. Together, that branch mint and the Bechtlers would produce almost nine million dollars in gold coinage during the antebellum period.
Following the formation of the national banking system, the United States government continued to assume greater and greater control over the printing and distribution of the nation’s currency. By 1887, the Bureau of Engraving and Printing in Washington, D.C., became responsible for producing all the paper money that circulated throughout the country, including national bank notes. The establishment of the Federal Reserve System in 1913 consolidated and intensified federal controls over the nation’s money supply. That system, which remains in force today, consists of twelve Federal Reserve districts that disburse United States currency to thousands of commercial banks. Those banks essentially buy money from the Federal Reserve by paying a percentage of interest known as the “discount rate.” The banks then loan and invest that money in various enterprises. They also help to monitor the condition of the nation’s currency by replacing notes and coins in circulation that are overly worn or damaged. North Carolina’s banks are located within the Fifth Federal Reserve District, which is headquartered in Richmond, Virginia.
After the establishment of the Federal Reserve System, public and private involvement in making and issuing currencies effectively ended on state and local levels. There have been, however, exceptions and occasions after 1913 when money shortages and other circumstances compelled local authorities to issue their own forms of money. During the Great Depression in the 1930s, Cumberland County and the City of Gastonia are two of many examples in North Carolina where cash-poor local governments issued scrip to help fund the operation of schools, the construction and repair of county and municipal roads, and the administration of other vital community services disrupted by the United States’ dire economic troubles. A piece of scrip, unlike a Federal Reserve note, is not legal tender, meaning it is not recognized by law as an acceptable payment for all public and private debts anywhere in the nation. Scrip is instead a form of paper money that is be used within a geographically defined area, usually for a specific purpose, and for a limited or fixed period of time.
Another, more up-to-date example of a North Carolina scrip is the “Plenty” in Orange County. First issued in 2002 by an incorporated, non-profit organization in Carrboro, the Plenty’s purpose is to support local commerce and safeguard area jobs through the use of a community-based currency. The Plenty’s face values of one, one-half, and one-quarter represent units based on an hourly wage of ten dollars per hour. Hence, residents in and around the town of Carrboro accept this scrip, under varying conditions, on par with United States currency of $10, $5, and $2.50. Plenty notes, which are printed with soy-based inks on a watermarked paper composed of recycled bamboo and hemp, feature very colorful decorative elements and the motto “In Each Other We Trust.” As far as imagery is concerned, all three denominations of the Plenty carry the same large oak tree and landscape on their faces. Their backs are distinguished by insets of local scenery and images of trout lilies, the eastern box turtle, and great blue heron.
On the national level, the United States Mint in 1999 launched a commemorative-coin program that has reconnected all the states, at least symbolically, to America’s money supply and to the nation’s numismatic history. The Mint over a ten-year period is striking five commemorative state quarters each year. Each of those twenty-five-cent pieces has the same portrait of President George Washington on its obverse but a unique design on its reverse. Design themes in the series include popular tourist sites, historic events, and other symbols associated with each state. The order of the coins’ release is chronological, in sequence with the dates when the states ratified the Constitution and joined the Union. When North Carolina entered the Union in November 1789, it was the twelfth state to do so. The United States quarter showcasing North Carolina is therefore the twelfth coin in the series. Issued in 2001, North Carolina’s “First Flight” quarter depicts the Wright Brothers’ first successful powered flight along the dunes at Kitty Hawk in Dare County on December 17, 1903.
Today, it is estimated that more than 675 billion dollars in United States currency are being used in daily transactions or held in vaults throughout the world. Over time this vast supply of dollars, at least in terms of actual coinage and Federal Reserve notes, will shrink as money increasingly assumes an electronic form. In North Carolina and elsewhere, most citizens now receive their salaries and conduct much of their business through computer networks. Money is no longer just coins or pieces of paper that people physically exchange; rather, it is more often simply groups of numbers in a data base that are subtracted or added to accounts through on-line banking services and the scanning of plastic debit and credit cards. Such electronic transactions will continue to increase and expand globally, although cash in its traditional forms will also continue to be used in the United States and in foreign economies for many years to come.