What is a 'Greenback'

A greenback is a slang term for U.S. paper dollars. Greenbacks got their name from their color, however, in the mid-1800s, "greenback" was a negative term. During this time, the Continental Congress did not have taxing authority. As a result, the greenbacks did not have a secure financial backing and banks were reluctant to give customers the full value of the dollar.

BREAKING DOWN 'Greenback'

It took half a century to get all the foreign coins and competing state currencies out of circulation, but by the early 1800s, the U.S. was ready to try the paper money experiment again. Bank notes had been in circulation for a while, but because banks issued more notes than they had coin to cover, these notes often traded at less than face value.

In the 1860s, the U.S. created over $400 million in legal tender to finance its war against itself. These were called greenbacks simply because the backs were printed in green. The government backed this currency and stated that it could be used to pay back public and private debts. However, despite the government backing, they were not exchangeable for gold or silver. 

Demand Notes vs. Paper Notes

Greenbacks came in two forms; demand notes and U.S. paper notes. Demand notes were issued in 1861 and 1862 to pay for salaries and other government expenses during the civil war. In February of 1862, the Legal Tender Act saw the government issue paper notes, which would eventually become the official currency of the U.S. as demand notes were phased out. 

During this period the value fluctuated according to the North's success or failure at certain stages in the war. However, due to the size of the issue - $400 million - the value of greenbacks against gold steadily declined. According to H. W. Brand is his book "Greenback Planet: How the Dollar Conquered the World and Threatened Civilization as We Know It," the value of the greenback had a temporary recovery in value after the battle of Gettysburg before plummeting to a value of 258 greenback to 100 gold (its lowest point) in 1864. When the war ended in 1865 the value of the greenback recovered to 150 greenback to 100 gold.

Today, the term greenback is an anecdotal term used by foreign exchange traders for the U.S. dollar.

 

RELATED TERMS
  1. Paper Money

    The physical notes or currency of a country that is used as a ...
  2. Commercial Paper

    Commercial paper is an unsecured debt instrument issued typically ...
  3. Federal Reserve Note

    A Federal Reserve Note is the physical bills that are held in ...
  4. Fine Paper

    High-quality securities that are assumed to be risk free, or ...
  5. Paper Trade

    Using simulated trading to practice buying and selling securities ...
  6. Gold Certificate

    A physical document resembling a paper bank note that entitles ...
Related Articles
  1. Investing

    7 Facts You Didn't Know About The Greenback

    There's more to that $10 bill in your pocket than you think - read on for some interesting facts about U.S. currency.
  2. Investing

    An introduction to commercial paper

    Commercial paper is a short-term instrument that can be a viable alternative for retail fixed-income investors looking for a better rate of return.
  3. Trading

    How the U.S. Dollar Became the World's Reserve Currency

    The U.S. dollar was first minted in 1914. Find out what occurred during the last century to make the U.S. dollar the world's reserve currency.
  4. Insights

    How Currency Works

    Currency offers key advantages over economies based on direct trade, including a broader market for sellers' goods and services and transport ease.
  5. Investing

    Commercial Paper

    Commercial paper is a short-term debt security issued by financial companies and large corporations. The corporation promises the buyer a return, or profit, for making the loan. The return is ...
  6. Investing

    How Gold Affects Currencies

    There is a strong correlation between gold's value and the strength of currencies trading on foreign exchanges.
  7. Tech

    The History Of Money: From Barter To Banknotes

    Money has been a part of human history for at least 3,000 years. Learn how it evolved.
  8. Investing

    ETF Plays For A Surging Greenback

    After years of declines, the U.S. dollar has regained its mojo. More importantly, those gains should continue throughout the New Year as various factors continue to push it upwards. For investors, ...
  9. Tech

    Is the ICO Whitepaper Dead?

    As more and more cryptocurrencies enter the market, the template of the white paper-the document touting the benefits of a new product-has changed.
RELATED FAQS
  1. What is the gold standard?

    Learn more about the gold standard, including its complicated global history and its connection to the fiat system and the ... Read Answer >>
  2. Is there a world currency? If so, what is it?

    There is no such thing as a world currency. However, since World War II, the dominant or reserve currency of the world has ... Read Answer >>
  3. What are some examples of securities that can be found in a money market fund?

    Learn about examples of securities found in money market accounts. These securities need to be safe, liquid and of short-term ... Read Answer >>
Hot Definitions
  1. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  2. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  3. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  4. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  6. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
Trading Center