Coins, Banknotes, Forgery Convertibility
Paper money originated in two forms: drafts, which are receipts for value held on account, and "bills", which were issued with a promise to convert at a later date.
Money is based on the coming to pre-eminence of some commodity as payment. The oldest monetary basis was for agricultural capital: cattle and grain. In Ancient Mesopotamia, drafts were issued against stored grain as a unit of account. A "drachma" was a weight of grain. Japan's feudal system was based on rice per year – koku.
At the same time, legal codes enforced the payment for injury in a standardized form, usually in precious metals. The development of money then comes from the role of agricultural capital and precious metals having a privileged place in the economy.
Such drafts were used for giro systems of banking as early as Ptolemaic Egypt in the first century BC.
The perception of banknotes as money has evolved over time. Originally, money was based on precious metals. Banknotes were seen as essentially an I.O.U. or promissory note: a promise to pay someone money, but not actual money. As banknotes became more widely used, they became more accepted as equivalent to precious metal. With the gradual removal of precious metals from the monetary system, banknotes evolved to represent fiat money.
Generally, a central bank or treasury is solely responsible within a state or currency union for the issue of banknotes. Historically, many different banks or institutions may have issued banknotes in a country. By virtue of the complex constitutional setup in the United Kingdom, two of the union's four constituent countries (Scotland and Northern Ireland) continue to print their own banknotes for domestic circulation, with the UK's central bank (the Bank of England) printing notes which are legal tender in England and Wales, and are also usable as money in the rest of the UK.
History
The use of paper money as a circulating medium is intimately related to shortages of metal for coins. In ancient China coins were circular with a rectangular hole in the middle. Several coins could be strung together on a rope. Merchants in China, if they became rich enough, found that their strings of coins were too heavy to carry around easily. To solve this problem, coins were often left with a trustworthy person, and the merchant was given a slip of paper recording how much money he had with that person. If he showed the paper to that person he could regain his money. Eventually from this paper money "jiaozi" originated. In the 600s there were local issues of paper currency in China and by 960 the Song Dynasty, short of copper for striking coins, issued the first generally circulating notes. A note is a promise to redeem later for some other object of value, usually specie. The issue of credit notes is often for a limited duration, and at some discount to the promised amount later. The original notes were restricted in area and duration, but the Yuan Dynasty, facing massive shortages of specie to fund their occupation of China, began printing paper money without restrictions on duration. By 1455, in an effort to rein in economic expansion and end hyperinflation, the new Ming Dynasty ended paper money, and closed much of Chinese trade.
Banknotes in Europe
Emergency paper money hand-written on playing cards was used in French Canada from 1685.
In the early 1690s, the Massachusetts Bay Colony was the first of the colonies to issue the permanently circulating banknotes. The use of fixed denominations and printed banknotes came into use in the 18th century.
In the United States, public acceptance of banknotes in replacement of precious metals was hastened in part by Executive Order 6102. This order carried the threat of a maximum $10,000 fine and a maximum of ten years in prison for anyone who kept more than $100 of gold in preference to banknotes. Similar measures were taken worldwide, with similar results.
Banknotes in the Americas
Materials used for banknotes
Most banknotes are made of dense 80 to 90 grams per square meter cotton paper (see also paper), sometimes mixed with linen, abaca, or other textile fibres. Generally, the paper used is different from ordinary paper: it is much more resilient, resists wear and tear, and also does not contain the usual agents that make ordinary paper glow slightly under ultraviolet light.
Early Chinese banknotes were printed on paper made of mulberry bark and this fibre is used in Japanese banknote paper today.
Unlike most printing and writing paper, banknote paper is impregnated with polyvinyl alcohol or gelatin to give it extra strength.
Most banknotes are made using the mould made process in which a watermark and thread is incorporated during the paper forming process.
The thread is a simple looking security component found in most banknotes. It is however often rather complex in construction comprising fluorescent, magnetic, metallic and micro print elements. By combining it with watermarking technology the thread can be made to surface periodically on one side only. This is known as windowed thread and further increases the counterfeit resistance of the banknote paper. This process was invented by Portals, part of the De La Rue group in the UK.
Recently this company has introduced many new features to the banknote world including Cornerstone, Platinum and Optiks, all registered trade marks of De La Rue. Cornerstone uses watermarking to reduce the number of corner folds by strengthening this part of the note. Platinum is a special coating to reduce the dirt picked up by banknotes. Optiks is a new thread based security feature that creates a plastic window in the paper which is very hard to copy.
Paper banknotes
The ease with which paper money can be created, by both legitimate authorities and counterfeiters, has led both to a temptation in times of crisis such as war or revolution to produce paper money which was not supported by precious metal or other goods, thus leading to hyperinflation and a loss of faith in the value of paper money, e.g. the Continental Currency produced by the Continental Congress during the American Revolution, the Assignats produced during the French Revolution, the paper currency produced by the Confederate States of America and the Individual States of the Confederate States of America, the financing of the First World War by the Central Powers (by 1922 1 gold Austro-Hungarian krone of 1914 was worth 14,400 paper Kronen), the devaluation of the Yugoslav Dinar in the 1990s, etc. Banknotes may also be overprinted to reflect political changes that occur faster than new currency can be printed.
In 1988, Austria produced the 5000 Schilling banknote (Mozart), which is the first foil application (Kinegram) to a paper banknote in the history of banknote printing. The application of optical features is now in common use throughout the world.
Counterfeiting and security measures on paper banknotes
Paper money originated in two forms: drafts, which are receipts for value held on account, and "bills", which were issued with a promise to convert at a later date.
Money is based on the coming to pre-eminence of some commodity as payment. The oldest monetary basis was for agricultural capital: cattle and grain. In Ancient Mesopotamia, drafts were issued against stored grain as a unit of account. A "drachma" was a weight of grain. Japan's feudal system was based on rice per year – koku.
At the same time, legal codes enforced the payment for injury in a standardized form, usually in precious metals. The development of money then comes from the role of agricultural capital and precious metals having a privileged place in the economy.
Such drafts were used for giro systems of banking as early as Ptolemaic Egypt in the first century BC.
The perception of banknotes as money has evolved over time. Originally, money was based on precious metals. Banknotes were seen as essentially an I.O.U. or promissory note: a promise to pay someone money, but not actual money. As banknotes became more widely used, they became more accepted as equivalent to precious metal. With the gradual removal of precious metals from the monetary system, banknotes evolved to represent fiat money.
Generally, a central bank or treasury is solely responsible within a state or currency union for the issue of banknotes. Historically, many different banks or institutions may have issued banknotes in a country. By virtue of the complex constitutional setup in the United Kingdom, two of the union's four constituent countries (Scotland and Northern Ireland) continue to print their own banknotes for domestic circulation, with the UK's central bank (the Bank of England) printing notes which are legal tender in England and Wales, and are also usable as money in the rest of the UK.
History
The use of paper money as a circulating medium is intimately related to shortages of metal for coins. In ancient China coins were circular with a rectangular hole in the middle. Several coins could be strung together on a rope. Merchants in China, if they became rich enough, found that their strings of coins were too heavy to carry around easily. To solve this problem, coins were often left with a trustworthy person, and the merchant was given a slip of paper recording how much money he had with that person. If he showed the paper to that person he could regain his money. Eventually from this paper money "jiaozi" originated. In the 600s there were local issues of paper currency in China and by 960 the Song Dynasty, short of copper for striking coins, issued the first generally circulating notes. A note is a promise to redeem later for some other object of value, usually specie. The issue of credit notes is often for a limited duration, and at some discount to the promised amount later. The original notes were restricted in area and duration, but the Yuan Dynasty, facing massive shortages of specie to fund their occupation of China, began printing paper money without restrictions on duration. By 1455, in an effort to rein in economic expansion and end hyperinflation, the new Ming Dynasty ended paper money, and closed much of Chinese trade.
Banknotes in Europe
Emergency paper money hand-written on playing cards was used in French Canada from 1685.
In the early 1690s, the Massachusetts Bay Colony was the first of the colonies to issue the permanently circulating banknotes. The use of fixed denominations and printed banknotes came into use in the 18th century.
In the United States, public acceptance of banknotes in replacement of precious metals was hastened in part by Executive Order 6102. This order carried the threat of a maximum $10,000 fine and a maximum of ten years in prison for anyone who kept more than $100 of gold in preference to banknotes. Similar measures were taken worldwide, with similar results.
Banknotes in the Americas
Materials used for banknotes
Most banknotes are made of dense 80 to 90 grams per square meter cotton paper (see also paper), sometimes mixed with linen, abaca, or other textile fibres. Generally, the paper used is different from ordinary paper: it is much more resilient, resists wear and tear, and also does not contain the usual agents that make ordinary paper glow slightly under ultraviolet light.
Early Chinese banknotes were printed on paper made of mulberry bark and this fibre is used in Japanese banknote paper today.
Unlike most printing and writing paper, banknote paper is impregnated with polyvinyl alcohol or gelatin to give it extra strength.
Most banknotes are made using the mould made process in which a watermark and thread is incorporated during the paper forming process.
The thread is a simple looking security component found in most banknotes. It is however often rather complex in construction comprising fluorescent, magnetic, metallic and micro print elements. By combining it with watermarking technology the thread can be made to surface periodically on one side only. This is known as windowed thread and further increases the counterfeit resistance of the banknote paper. This process was invented by Portals, part of the De La Rue group in the UK.
Recently this company has introduced many new features to the banknote world including Cornerstone, Platinum and Optiks, all registered trade marks of De La Rue. Cornerstone uses watermarking to reduce the number of corner folds by strengthening this part of the note. Platinum is a special coating to reduce the dirt picked up by banknotes. Optiks is a new thread based security feature that creates a plastic window in the paper which is very hard to copy.
Paper banknotesThe ease with which paper money can be created, by both legitimate authorities and counterfeiters, has led both to a temptation in times of crisis such as war or revolution to produce paper money which was not supported by precious metal or other goods, thus leading to hyperinflation and a loss of faith in the value of paper money, e.g. the Continental Currency produced by the Continental Congress during the American Revolution, the Assignats produced during the French Revolution, the paper currency produced by the Confederate States of America and the Individual States of the Confederate States of America, the financing of the First World War by the Central Powers (by 1922 1 gold Austro-Hungarian krone of 1914 was worth 14,400 paper Kronen), the devaluation of the Yugoslav Dinar in the 1990s, etc. Banknotes may also be overprinted to reflect political changes that occur faster than new currency can be printed.
In 1988, Austria produced the 5000 Schilling banknote (Mozart), which is the first foil application (Kinegram) to a paper banknote in the history of banknote printing. The application of optical features is now in common use throughout the world.
Counterfeiting and security measures on paper banknotes
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