Dolla Dolla Bills Y’all: The History and Evolution of Cash

Updated on March 22, 2020 Updated on March 22, 2020
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$100 bills
Table of Contents  
  1. The Evolution of Cash
  2. U.S. Money
  3. On the Cusp
  4. A World Without Cash
  5. Fun Facts
  6. Show Notes

We’re Listen Money Matters, but we’ve never discussed money. Get ready to holla. Dolla dolla bills y’all: The history and evolution of cash.

Societies haven’t always used cash to transact business. The evolution of cash is pretty fascinating.

The Evolution of Cash

Money is around 3,000 years old. Before that, societies bartered. I make candles. You make shoes. I need shoes, and you need candles. I give you some candles, and you give me some shoes. This isn’t a great system though.

How many candles are the shoes worth? What if I need shoes, but you don’t need candles? There needed to be a better system.

Coins and Paper Currency

The first coins were minted by King Alyatttes of Lydia (modern Western Turkey) in 600 BCE and minted with a naturally occurring mixture of silver and gold. Paper bills first appear in China during the Tang Dynasty (618-907 A.D.).

Paper currency was first used in what became the U.S. in 1690 and was known as Colonial Notes. The Continental Congress issued paper notes called Continental Currency during the Revolutionary War to fund the militia.

U.S. Money

The United States and the dollar are inextricably linked, and the dollar has been around almost as long as the country.

$1 bill from 1862

The First Dollar

Inflation had caused the Continental Currency to become worthless, so a new form of currency was needed. Congress created the U.S. dollar in 1792 and designated it our standard unit of money. The term dollar wasn’t coined (ha!) by the U.S. though. Spain had a coin called the dollar.

For decades, it was state-chartered banks and not the federal government that issued paper money. This meant that there were thousands of different kinds of currency floating around the country. This was untenable; we needed a single, national currency.

The National Banking System

To address this problem,  we created the National Banking System in 1863.  It eliminated all those different varieties of paper money that was in circulation and created a system of banks that were charted by the federal government rather than by state governments.

The Guys in Suits

Counterfeiting was a significant problem and combatting it was the original purpose of the Secret Service. After President McKinley’s assassination in 1901, its duties expanded to include protecting future presidents.

The Secret Service does both today. The agency protects the U.S. financial system from crimes including counterfeiting, bank, mail, wire, and credit card fraud.

No Reverse Image Search

In 1889, legislation passed that required that currency and other securities with portraits also had to include the name of the person portrayed.

Only portraits of deceased persons “whose place in history the American people know well” are allowed to be used on government-issued securities.

Which is good because none of us want Trump dollars in our wallets. Were there no law already in place preventing such, I’m sure they’d be a thing.

Separation of Church and State!

We have (for now) separation of church and state enshrined in the First Amendment so why is “In God We Trust” printed on our money?

It wasn’t always there.

It was put in place in 1955 as a way to distinguish gawd fearing ‘Mericans from the godless commies of the USSR.

This is why “One nation, under God” was added to the Pledge of Allegiance too. The phrase was not initially in the pledge; it wasn’t in use before 1954.

George Washington on the $1 bill, waving all around

No More Baller Bills

In 1946, the U.S. stopped printing bills in denominations of $1,000 or more, but they continued to circulate until 1969 when the Federal Reserve recalled them.

President Nixon thought to have such large denominations circulating would make it easier for criminals to launder money and printing the bills was not cost effective.

These large bills had small production runs, running a lot of $1 notes was cheaper than producing a few $1,000 notes. Plus, you can’t make it rain as much if you’re tossing out $1,000 bills compared to singles. That’s probably the real reason.

The Gold Standard

For many years, the U.S. used the gold standard. 

The gold standard is a monetary system where a country’s currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is used to determine the value of the currency. For example, if the U.S. sets the price of gold at $500 an ounce, the value of the dollar would be 1/500th of an ounce of gold.

No country today uses the gold standard. The U.S. stopped almost completely in 1933 and ended the standard entirely in 1971. We replaced the gold standard with fiat money. Fiat money is currency used by government order, or fiat, which deems that a currency, for us the dollar, must be accepted as a means of payment.

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On the Cusp

The U.S. and the world are on the cusp of becoming cashless societies.

Sweden Leads the Way

Sweden is on pace to become cashless in the next five years. The country was plagued by a series of bank robberies, one involving a helicopter! Bus robberies were common too and unions, concerned for driver safety, demanded an end to cash transactions on buses.

There is a law in place that allows stores to decline to accept cash, overruling the central bank law requiring that they do. If a store doesn’t want to accept cash, they only have to post a sign informing customers of the policy. Based only on that,  customers have legally agreed to use only electronic payments.

The Indian Debacle

In  November 2016, India’s Prime Minister, Narendra Modi, decreed that the Rs500 and Rs1,000 notes, India’s two highest denominations, would be demonetized. Citizens had to deposit the notes into banks by December 30, 2016, and there were restrictions on withdrawals.

The reason given was to curb tax evasion, the black market, and government corruption. All noble goals but it voided 86% of the value of all circulating cash. India is heavily cash dependent, so the edict caused panic.

The stock market fell more than 6% on the day following the announcement, there were cash shortages, and people died waiting on line to deposit their notes in the heat.

A World Without Cash

What will a world without cash look like and can it ever happen entirely?

If Money Isn’t Printed, Where Will It Come From?

If governments no longer issue cash, we might use alternative currencies, some of which are already in use like cryptocurrencies,  the TEM in Greece and Berkshares, a currency local only to the Berkshire region of Massachusettes which are spent at local businesses. Will we all be using Bitcoin? 

But how can these currencies be regulated and how can the supply be controlled? Central banks may issue their own digital currency (CBDC). In the current system, consumers can only access central bank money using coins and bank notes.

But a consumer-focused CBDC could extend access of digital currency to everyone and ultimately disrupt the world’s financial system and economy.

Pros of a Cashless Society

No more cash would mean fewer crimes, both street, and white collar. When cash gets stolen, there isn’t a way to trace it. If digital goes missing, it leaves an easy to follow trail right to the thief.

Printing money and moving it around is expensive. We can use all that money we save to give everyone healthcare! (It won’t go towards that.)

The government always finds a need for whatever money it gets.

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Not using cash is more convenient. I hate using cash, getting from an ATM, carrying it around, keeping track of it. It’s a pain in the ass. I’ll be glad when I never have to have cash for anything.

Cons of a Cashless Society

You think you have no privacy now? Wait until there is no cash. You’re gonna have to pay for your weed and hookers in a traceable currency.

Remember the 2003 Blackout? If you had cash, you could still buy things in most places. But if we’re cashless, what will we do? Loot I guess.

What will the unbanked do? The unbanked are those who don’t have a bank account. About ten million U.S. household are unbanked. Some don’t trust banks, others end up on a blacklist, and banks refuse to allow them to open an account because they’ve misused bank accounts in the past.

If you’re too poor to have a bank account, you’re likely to poor to have a smartphone or other device that allows you to participate in a cashless economy.

It’s Coming

If you don’t want a cashless society, you have a bit of time. It’s coming and sooner rather than later but there are just too many variables for it to happen immediately or in one fell swoop. It would also take consensus by those in charge, and we are far from that too so don’t sweat it in the short term at least.

Fun Facts

This episode wasn’t meant to teach you how to do X, Y, or Z, more of a fun history lesson on the evolution of cash lesson and a glimpse into what the future might look like. Here are a few more fun facts about money.

* The average amount withdrawn from an ATM is $80
* A $1 bill lasts 18 months – $20 bill, four years
* A 2002 study in the U.S. showed disease-causing germs on 94% of bills tested
* It costs 1.66 cents to create one penny
* U.S. currency is composed of 25% linen and 75% cotton

Show Notes

Stillwater Artisinal Recess: Dry hopped sour ale.

Pod Recommendation:  50 Things That Made the Modern Economy

LMM Community: Join your fellow money nerds!

Thank you to our sponsor: Policy Genius


Candice Elliott - Senior Editor
Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.
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