A History of Printed Money

These conditions presented the public with new problems. How could the man on the street know which banknotes were good and which were not? Newspapers helped by publishing lists of issuers and the discounts applicable to their banknotes. Banks, many of which circulated their own banknotes, also traded information. And, overlying the official networks, rumor often played a major roll in determining transaction exchange rates. Even a hint someone’s wife’s friend had trouble exchanging a banknote with an issuer was enough to undermine confidence in the issuing agency – driving some issuers to undeserved, premature bankruptcy.

Overall, however, the public’s skepticism was well founded. Not only did some governments and other issuers of banknotes circulate banknotes with accumulated face values exceeding reserves, some of the more unscrupulous issuers circulated money with no backing at all – counting instead on less-knowledgeable users accepting them without questioning the note’s provenance.

Unscrupulous issuers had a bag of tricks to avoid redeeming their banknotes. One method was to issue good money printed on poor-quality paper - the issuer hoping the paper would disintegrate before it was redeemed. Another was for the issuer to change addresses or even move to a different town. Or, issuers would circulate notes with sound specie backing and then, when their banknotes were well established, abscond with the backing gold or silver.

Not least were the counterfeiters. A few good artists made and circulated reproductions meticulously drawn by hand - a method which, given the amount of labour involved and the difficulty of reproducing a printed product, was probably not practiced extensively. Recognizing an opportunity, would-be counterfeiters were a problem from the beginning, whether in China or Europe. Edicts are known specifying death to counterfeiters dating from the first kingdoms issuing money. The earliest known Chinese banknotes carried warnings against counterfeiting, implying they too had to contend with the problem.

Elaborate engraving was not well developed when banknotes were first issued in Europe. Indeed, until about 1820, most banknotes tended to be rather crude – which meant they could easily be duplicated. Some early issues were so widely copied the counterfeits in circulation outnumbered legitimate banknotes. With public confidence in the balance, banknote designs became more sophisticated. Unfortunately, so did the counterfeiters.