Coin World Article “Understanding Obsolete Currency”

Understanding Obsolete Currency
Is the Key to Taking Advantage
Of a Great Collecting Opportunity

One of the most interesting areas of American paper money is “obsolete currency”, roughly defined as privately issued paper money used in United States after the Revolution and through the Civil War. Starting in October, 2004, R. M. Smythe & Co. will begin a series of auctions featuring the Herb and Martha Schingoethe Collection of obsolete currency, containing nearly thirty thousand different notes. This represents a great opportunity for those who already collect obsoletes, and for those who would like to begin collecting something new and exciting. Understanding the material is the key to taking advantage of this great opportunity.

The origins of obsolete currency can be traced to the staggering inflation that made the paper money issued by the Continental Congress from 1775 to 1779 virtually worthless. As they watched their Continental notes become valueless, the American public developed a deep-rooted mistrust of all paper money issued by the Federal Government. This attitude would prevail right on through the Civil War. A void was created by the lack of Federally issued currency, and in order to fill it, states, cities, banks, railroads, insurance companies, merchants of all kinds, and private individuals issued their own notes and scrip (small change notes).

What resulted was an incredible universe of issuers, denominations, and varieties. While this now presents a wonderful opportunity for paper money collectors, back then it caused a host of problems for the people who had to use the notes as money. The average person could not possibly stay informed about what each of the tens-of-thousands of different issues looked like. Notes accepted by merchants might be received at anywhere from the full face value down to practically nothing, depending on the proximity of the issuer, or on the issuer’s credibility. Counterfeits, notes that were fraudulently raised from a lower denomination to a higher denomination, and notes with their bank titles altered, were widespread, but the real reason that the obsolete currency era ended was the War Between the States.

In order to raise money to preserve the Union, President Lincoln and his Secretary of the Treasury, Samuel Chase, perceived the need for a single, uniform Federal Currency, and a central banking system. Out of this need came the creation of the National Banking System. After the War, a 10% Revenue Tax was levied on all non-Federally-issued paper money. For all intents and purposes, this put a virtual end to the issuance of the notes that we now refer to as “obsoletes”.

What did these obsolete notes look like? How were they made? What was involved in choosing the designs? What did they represent? What determines value? These are just some of the areas to be investigated as we look at highlight notes from the Herb and Martha Schingoethe Collection.

The Globe Bank was organized in 1831, and issued notes under that title right through the 1860s. The very first notes the Globe Bank issued in 1831 had a vignette (small engraved illustration) relating to the bank title. It showed Archimedes lifting the earth with a lever. This was a “stock” vignette, meaning that the bank note company had used it on other jobs, and that it could be ordered quickly, and cheaply. The vignette appearing on the 1862 note pictured above has an allegorical representation of the Four Seasons surrounding the earth, thus continuing the bank’s tradition of picturing a globe. The 1862 vignette is a custom-made design engraved by Wellstood, Hay & Whiting, one of the seven leading bank note companies that were consolidated into the American Bank Note Company in 1858. Note the “ABNCo” monogram visible just in front of the title.

This beautifully engraved note was printed in two colors, black and red, requiring two separate printing plates, and two passes through the press. While this added considerably to the expense of making the notes, security bank note printers followed a different philosophy than that of most businessmen. They were less concerned about the cost of making their product, and more concerned about making the notes as difficult to counterfeit as possible. Other security features included the elaborate backgrounds placed behind the denominations. These were done with a geometric lathe, almost impossible for a counterfeiter to obtain, and even more difficult for a counterfeiter to operate. The light red background tint is actually made up of the words “Ten Dollars” in micro-letters repeated hundreds of times. An additional safety feature is that signatures had to be hand-signed by bank officials.

The 1862 $10 Globe Bank note was printed using the intaglio process, from steel plates. In order to produce black lines on the final product, the engraver cut grooves into the surface of the plate. Wherever white space was required on the note, the surface of the plate was left untouched. Before each sheet was printed it was inked, and the surface carefully wiped. Black ink remained in the engraved grooves. The paper was then placed directly onto the plate, and the press was used to force the paper down into the grooves filled with ink. Gray tones were created through an illusion that depended on how far apart the black lines were engraved, or how wide each engraved line was rendered

The example pictured above was from the last series of $10 bills that the bank would issue under the Globe Bank title. In 1865 the Globe Bank became part of the National Banking System, and changed its name to the Globe National Bank of Providence. When most banks from the “obsolete” era became National Banks, they generally continued to redeem the notes previously issued, and sometimes continued to do so right into the twentieth century. This explains why fully issued, uncancelled notes such as the one pictured above are so rare.

Why aren’t obsolete bank notes much more widely collected? While large coin collections often appear in auctions on a regular basis, perhaps a half dozen large collections of obsoletes have appeared in a decade. Unlike coins, population census information and the amounts issued are hard to come by. Publications listing the notes of several, but not all, of the states are available, but there is no single definitive book on the subject. Perhaps the most comprehensive published source, United States Obsolete Bank Notes 1782-1866, by Haxby, is now almost a decade-and-a-half-old, and out of print. A new edition is nowhere in sight.

Over the next few years, this situation will change. In October, R. M. Smythe & Co. will begin to sell the first notes from an obsolete currency collection that is unprecedented in its vastness and completeness, the Herb and Martha Schingoethe Collection. As the Schingoethe notes are sold, the prices realized will become available to collectors, dealers, and researchers, helping everyone in determining values for the notes that they may encounter in the future. It could also lead to greater appreciation of one of the most interesting fields in all of numismatics.

New collectors are invited to join the Society of Paper Money Collectors. They should subscribe to Coin World, and Bank Note Reporter. The best way to get started in any new field is to read the right books. We highly recommend the following: Interesting Notes, a series by Roger H. Durand; individual volumes on the issues of various states published by the Society of Paper Money Collectors and others; Obsolete Bank Notes by Haxby; An Introduction to Collecting Obsolete Currency published by the Professional Currency Dealer’s Association; and many of the NASCA and R. M. Smythe Auction Catalogs. The catalogs of The Herb and Martha Schingoethe Collection should also prove to be of great value.

From time to time, I will be writing more about varying aspects of collecting obsolete currency, using notes from the Herb and Martha Schingoethe Collection to give some insight into this fascinating area of numismatics.