People living in British Colonies of America preferred coins and barter over paper notes, as the latter were sometimes difficult to redeem. Since notes were not made of metals, they were prone to value depreciation as well. Only Britain had the exclusive right to mint coins in these colonies.
A war was fought in 1712 between the new European settlers of North Carolina and the original inhabitants, the Tuscarora. North Carolina issued handwritten notes of credit to fund this war till 1729. North Carolina was the only Colony to produce handwritten notes. They were to be redeemed at a later date after tax was collected. The credit bills never had any intrinsic value. However, people started printing fake notes. The only security feature they had were the spirals at the top of the note. The issuer held the other half of the spirals and compared the note to the counterfoil to authenticate.
North Carolina also kept re-issuing bonds that were already redeemed leading to further economic downfall. They avoided printing costs by not destroying the bonds from earlier years and re-circulating them. Over time, the value of these bonds depreciated. Finally, North Carolina started destroying redeemed bills regularly after 1748.
Wars went on which increased debt. Bills of credit were issued in 1748, 1754, 1768 and 1771 to fund different wars. The Revolutionary War began in 1775 and in 1776, North Carolina got independence from British rule. The last colonial notes were issued in 1785 to recover from the War and its economic losses.
Slowly, the production of Paper Notes was terminated as their value kept on reducing. The 1792 Coinage Act was introduced and only coins were struck for the USA after that. The US never issued paper notes again for the next 20 years.
Image Courtesy: PMG
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