Monetary Aspects of the Treasury Notes of the War of 1812

Between 1812 and 1815, the United States authorized five Treasury note issues. In total, over $36 million in denominations of $3 to $1000 were emitted. The last issue included small circulating notes in denominations of less than $100. Because of the shortage of adequate circulating medium and revenue to conduct the War of 1812, these notes proved to be extremely useful as they were transferable by delivery and receivable for duties, taxes, and public use at par plus accrued interest. They also served as interest-bearing reserves for banks since they were convertible into any kind of money and bore interest simultaneously. The success of the Treasury notes was demonstrated by the fact that they were fully subscribed and accepted by the banks and merchants. In addition, the small Treasury note issues of 1815 indirectly served to increase the circulating medium of the country. They were used to buy goods and services by individuals, pay custom duties by merchants, and acted as cash reserves for banks, preventing bank notes from being discounted. They thus became the first circulating paper currency issued by the United States after ratification of the Constitution.