Materials used to make paper money

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History of money Paper currency first developed in Tang Dynasty China during the 7th century, although true paper money did not appear until the 11th century, during the Song Dynasty. The usage of paper currency later spread throughout the Mongol Empire. European explorers like Marco Polo introduced the concept in Europe during the 13th century. The perception of banknotes as money has evolved over time. Originally, money was based on precious metals. Banknotes were seen by some as an I. With the removal of precious metals from the monetary system, banknotes evolved into pure fiat money.

Early Chinese paper money[ edit ] Song Dynasty Jiaozi, the world's earliest paper money. List of Chinese inventionsEconomy of the Song Dynastyand Jiaozi currency Development of the banknote began in the Tang Dynasty during the 7th century, with local issues of paper currency, although true paper money did not appear until the 11th century, during the Song Dynasty. 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.

A sheet of paper is fed into the press where it passes between the master plate cylinder and a hard, smooth impression cylinder under pressures reaching 15, psi 1, bar. These became banknotes when the manager of the Bank decoupled the rate of note issue from the bank currency reserves. What's with that creepy single eye? Before national currencies and efficient clearing houses, banknotes were only redeemable at face value at the issuing bank. How wide is America in pennies? The attempts by the Bank of England and the Royal Mint to stamp out currency crime led to new policing strategies, including the increased use of entrapment. Banknotes were originally a claim for the coins held by the bank, but due to the ease with which they could be transferred and the confidence that people had in the capacity of the bank to settle the notes in coin if presented, they became a popular means of exchange in their own right.

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.

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Eventually, the Song Dynasty paper money called " jiaozi " originated from these promissory notes. By the Song Dynastyshort 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 jiaozi nevertheless did not replace coins during the Song Dynasty; paper money was used alongside the coins. The central government soon observed the economic advantages of printing paper money, issuing a monopoly right of several of the deposit shops to the issuance of these certificates of deposit. Even before this point, the Song government was amassing large amounts of paper tribute. It was recorded that each year before AD, the prefecture of Xin'an modern ShexianAnhui alone would send 1, sheets of paper in seven different varieties to the capital at Kaifeng.


For the printing of paper money alone, the Song court established several government-run factories in the cities of HuizhouChengduHangzhouand Anqi. The founder of the Yuan DynastyKublai Khanissued paper money known as Chao in his reign. The original notes during the Yuan Dynasty were restricted in area and duration as in the Song Dynasty, but in the later course of the dynasty, facing massive shortages of specie to fund their ruling in China, they began printing paper money without restrictions on duration. The Venetian merchants were impressed by the fact that the Chinese paper money was guaranteed by the State.

European explorers and merchants[ edit ] According to a travelogue of a visit to Prague in by Ibrahim ibn Yaqubsmall pieces of cloth were used as a means of trade, with these cloths having a set exchange rate versus silver. In the beginning these were personally registered, but they soon became a written order to pay the amount to whoever had it in their possession. These notes are seen as a predecessor to regular banknotes by some but are mainly thought of as proto bills of exchange and cheques. In the 14th century, it was used in every part of Europe and in Italian city-state merchants colonies outside of Europe.

For international payments, the more efficient and sophisticated bill of exchange "lettera di cambio"that is, a promissory note based on a virtual currency account usually a coin no longer physically existingwas used more often. All physical currencies were physically related to this virtual currency; this instrument also served as credit. Birth of European banknotes[ edit ] The first paper money in Europe, issued by the Stockholms Banco in The shift toward the use of these receipts as a means of payment took place in the midth century, as the price revolutionwhen relatively rapid gold inflation, was causing a re-assessment of how money worked.

The goldsmith -bankers of London began to give out the receipts as payable to the bearer of the document rather than the original depositor. This meant that the note could be used as currency based on the security of the goldsmith, not the account holder of the Goldsmith-banker. This pivotal shift changed the simple promissory note into an agency for the expansion read article the monetary supply itself.

As these receipts were increasingly used in the money circulation system, depositors began to ask for multiple receipts to be made out in smaller, fixed denominations for use as money. The receipts soon became a written order to pay the amount to whoever had possession of the note.

These notes are credited as the first modern banknotes. Cheap foreign imports of copper had forced the Crown to steadily increase the size of the copper coinage to maintain its value relative to silver. The heavy weight of the new coins encouraged merchants to deposit it in exchange for receipts. These became banknotes when the manager of the Bank decoupled the rate of note issue from the bank currency reserves. Three years later, the bank went bankrupt, after rapidly increasing the artificial money supply through the large-scale printing of paper money.

The Bank began the first permanent issue of banknotes a year later.

The modern banknote rests on the assumption that money is determined by a social and legal consensus. A gold coin's value is simply a reflection of the supply and demand mechanism of a society exchanging goods in a free market, as opposed to stemming from any intrinsic property of the metal. By the late 17th century, this new conceptual outlook helped to stimulate the issue of banknotes. The economist Nicholas Barbon wrote that money "was an imaginary value made by a law for the convenience of exchange.

Established in to raise money for the funding of the war against Francethe bank began issuing notes in with the promise to pay the bearer the value of the note on demand. They were initially handwritten to a precise amount and issued on deposit or as a loan.


Fully printed notes that didn't require the name of the payee and the cashier's signature first appeared in In the United States there were early attempts at establishing a central bank in andbut it was only in that the federal government of the United States began to print banknotes. Central bank issuance of legal tender[ edit ] The Bank of England gained a monopoly over the issue of banknotes with the Bank Charter Act of Originally, the banknote was simply a promise to the bearer that he could redeem it for its value in specie, but in the second in a series of Bank Charter Acts established that banknotes would be considered as legal tender during peacetime.

The Act gave the Bank of England an effective monopoly over the note Issue from However, this is not always the case, and historically the paper currency of countries was often handled entirely by private banks. Thus, many different banks or institutions may have issued banknotes in a given country.

Commercial banks in the United States had legally issued banknotes before there was a national currency; however, these became subject to government authorization from to In the last of these series, the issuing bank would stamp its name and promise to pay, along with the signatures of its president and cashier on a preprinted note. By this time, the notes were standardized in appearance and not too different from Federal Reserve Notes.

Example of a banknote issued by a commercial bank: For example, by virtue of the complex constitutional setup in the United Kingdom, certain commercial banks in two of the state's four constituent countries Scotland and Northern Ireland continue to print their own banknotes for domestic circulation, even though they are not fiat money or declared in law as legal tender anywhere.

The UK's central bank, the Bank of Englandprints notes which are legal tender in England and Wales ; these notes are also usable as money but not legal tender in the rest of the UK see Banknotes of the pound sterling. In the two Special Administrative Regions of the People's Republic of Chinaarrangements are similar to those in the UK; in Hong Kong, three commercial banks are licensed to issue Hong Kong dollar notes[36] and in Macaubanknotes of the Macanese pataca are issued by two different commercial banks.

Banknotes can be overstamped with new denominations, typically when a country converts to a new currency at an even, fixed exchange rate in this case, Prior to the introduction of banknotes, precious or semi-precious metals minted into coins to certify their substance were widely used as a medium of exchange. The value that people attributed to coins was originally based upon the value of the metal unless they were token issues or had been debased.

Banknotes were originally a claim for the coins held by the bank, but due to the ease with which they could be transferred and the confidence that people had in the capacity of the bank to settle the notes in coin if presented, they became a popular means of exchange in their own right. They now make up a very small proportion of the "money" that people think that they have as demand deposit bank accounts and electronic payments have negated the need to carry notes and coins. Banknotes have a natural advantage over coins in that they are lighter to carry but are also less durable.

Banknotes issued by commercial banks had counterparty riskmeaning that the bank may not be able to make payment when the note was presented. Notes issued by central banks had a theoretical risk when they were backed by gold and silver. Both banknotes and coins are subject to inflation.

The durability of coins means that even if metal coins melt in a fire or are submerged under the sea for hundreds of years they still have some value when they are recovered. Gold coins salvaged from shipwrecks retain almost all of their original appearance, but silver coins slowly corrode. Discounting to face value: Before national currencies and efficient clearing houses, banknotes were only redeemable at face value at the issuing bank. Even a branch bank could discount notes of other branches of the same bank.

The discounts usually increased with distance from the issuing bank. The discount also depended on the perceived safety of the bank. When banks failed the notes were usually partly redeemed out of reserves, but sometimes became worthless. Counterfeiting paper notes has always been a problem, especially since the introduction of color photocopiers and computer image scanners. Numerous banks and nations have incorporated many types of countermeasures in order to keep the money secure; however, extremely sophisticated counterfeit notes known as superdollars have been detected in recent years.

Manufacturing or issue costs. Coins are produced by industrial manufacturing methods that process the precious or semi-precious metals, and require additions of alloy for hardness and wear resistance. By contrast bank notes are printed paper or polymerand typically have a higher cost of issue, especially in larger denominations, compared with coins of the same value. Banknotes lose economic value by wear, since, even if they are in poor condition, they are still a legally valid claim on the issuing bank.

  • Paper money does bear the signatures of four African American men who served as Registers of the Treasury Blanche K.
  • It is illegal for anyone else to manufacture or possess this specific paper.
  • Flawed money is bad money and cannot be placed into circulation.

However, banks of issue do have to pay the cost of replacing banknotes in poor condition and paper notes wear out much faster than coins. Coins can be expensive to transport for high value transactions, but banknotes can be issued in large denominations that are lighter than the equivalent value in coins. Coins can be checked for authenticity by weighing and other forms of examination and testing.

These costs can be significant, but good quality coin design and manufacturing can help reduce these costs. Banknotes also have an acceptance cost, the costs of checking the banknote's security features and confirming acceptability of the issuing bank. The different disadvantages between coins and banknotes imply that there may be an ongoing role for both forms of bearer money, each being used where its advantages outweigh its disadvantages.

The cotton is sometimes mixed with linenabacaor other textile fibres. Generally, the paper used is different from ordinary paper: Unlike most printing and writing paper, banknote paper is infused with polyvinyl alcohol or gelatin, instead of water, to give it extra strength. Early Chinese banknotes were printed on paper made of mulberry bark. Mitsumata Edgeworthia chrysantha and other fibers are used in Japanese banknote paper [43] a kind of Washi. Paper money from different countries 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.

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Other related methods include watermarking to reduce the number of corner folds by strengthening this part of the note, coatings to reduce the accumulation of dirt on the note, and plastic windows in the paper that make it very hard to copy. Counterfeiting and security measures[ edit ] When paper bank notes were first introduced in England in the s, they resulted in a dramatic rise in counterfeiting. The attempts by the Bank of England and the Royal Mint to stamp out currency crime led to new policing strategies, including the increased use of entrapment. Banknotes may also be overprinted to reflect political changes that occur faster than new currency can be printed.

InAustria produced the Schilling banknote Mozartwhich is the first foil application Kinegram to a paper banknote in the history of banknote printing.

Several coins could be strung together on a rope. The original notes during the Yuan Dynasty were restricted in area and duration as in the Song Dynasty, but in the later course of the dynasty, facing massive shortages of specie to fund their ruling in China, they began printing paper money without restrictions on duration. The master die is then placed in storage. Paper money does bear the signatures of four African American men who served as Registers of the Treasury Blanche K. The BEP says it would take 4, double folds first forward, and then backwards before a note will tear.

The application of optical features is now in common use throughout the world. Many countries' banknotes now have embedded holograms.


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