Over three centuries ago on this day, Massachusetts printed America's first paper money. Before creating bills, Americans used Pine Tree Shillings and other coins as their currency. After the British shutdown a Massachusetts mint, these coins were in short supply.
So, in 1689, when the British wanted Americans to fight the French in Canada, there was no money available to pay the troops. Since the soldiers wouldn't fight for free, the government thought it best to issue certificates to the troops in lieu of paying them with coins. A piece of paper would represent a coin's worth and could later be redeemed for "real money."
The experiment worked and the trend caught on. The British government continued circulation in Massachusetts and eventually other colonies began issuing these paper promises too. If anyone ever wanted to redeem the note for coins, they could. Americans trusted that the government would pay them, and that's how some worthless paper became valuable.
But with this trust also came deceit. As the National Museum of American History notes, those looking to game the system realized that they could feign wealth by crafting their own paper money.
No twenty-shilling notes were actually issued by Massachusetts in 1690. Yet someone skilled with a pen thought there ought to be one, and proceeded to create it, altering the original denomination of two shillings sixpence.
Like the very realistic-looking 20 shilling bill from 1690 seen above.
Over the years our bills have not only become harder to counterfeit and but also have come to represent a much more abstract idea. Three hundred years ago, Americans could redeem the paper for coins, which represented gold, theoretically meaning the paper was worth actual gold. No longer held to this gold standard, our currency relies on the faith that Americans -- and the world -- have in the value of U.S. credit and the economy.
Image: Smithsonian Institution's National Museum of American History.