What is a note? A note is basically a statement of indebtedness,
A note has four elements. First, it has a maker, i.e., a person or organization issuing the note. Second, it
has the name of the party which is to receive payment, Third, it has a due date, a specific date when the payment
is due (or a series of due dates when periodic payments are specified). Fourth, it states what is to be paid.
Thus, a note is a contract, i.e., an agreement by one party to provide a service or thing to another party for
a good and valuable consideration.
For example, John agrees in writing to give Frank a bushel of wheat after the harvest in return for using his threshing
machine. John is the maker, Frank is the party to receive payment, after the harvest is the due date, and the
bushel of wheat is the amount to be paid. This constitutes a "note."
A bank note is similar with the bank being the maker. The party to receive payment is usually the bearer or person
holding the note, as in "pay to the bearer." The due date is usually "on demand," i.e., anytime
the party to receive the payment wishes. The amount is generally specified in dollars. Bank notes payable in
silver are generally referred to as silver certificates; those payable in gold are referred to as gold certificates.
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This depicts a bank note with The Bank of the United States being the maker, J. Mason being the party to receive payment, 3000 dollars is the amount to be paid and December 13th, 1840 is the due date. The Bank of the United States was a private bank.
The use of notes as paper currency dates back to the 1600's. Jewelers of the time would accept deposits of gold
from customers and issue them receipts for the gold held on deposit. These receipts evolved to become notes, made
payable to the bearer on demand. Since the notes were more convenient to carry around than the gold they represented,
people became accustomed to buying and selling things using these notes.
Then, some of the jewelers realized that people rarely asked to redeem their notes for gold and figured they could
issue more notes than they had gold on deposit for. They would "create" additional notes and lend out
the money so created and collect interest on it. Hence, these jewelers became bankers and, as long as they did
not get too greedy, they profited. If they issued too many bank notes relative to the gold stocks they held, people's
confidence in the bank notes would drop and there would be a run on the bank, as people tried to convert their
bank notes to gold (or silver) before the gold on deposit in the bank ran out.
Paper currency in the United States goes back to 1690. During the Revolutionary War, Congress issued Continental
Currency notes that were not redeemable, i.e., they served as money through a government edict. They rapidly depreciated
and were basically worthless after a few years, hence the phrase, "not worth a continental."
Subsequently, paper currency was issued by private banks until 1861 when financial demands imposed by the War Between
the States prompted the issuing of Federal paper currency known as "greenbacks" that were redeemable
in dollars (silver). From 1861 thru 1913, with slight variations in wording, US Treasury Notes were payable in
gold or silver coin (lawful) money, to the bearer, on demand.
This depicts a five dollar silver certificate, issued by the United States government in 1861. Note the wording, "The United States promises to pay to the bearer five dollars." This means five silver dollars as the definition of a dollar (at that time) was a silver dollar containing a specific amount of silver. The maker is the United States (government), the party to receive payment is the bearer, the amount to be paid is five dollars, but there is no due date (on demand is assumed).
This depicts a US Treasury note from 1878. This is a silver certificate as it "certifies that that have been deposited with the Treasurer/US at Washington DC, payable at this office to the bearer on demand, one thousand silver dollars."