A History Of Note

A history of note

In 2016 the Bank of England will issue their first polymer (plastic) banknotes. Here’s a brief history of the banknote, from Chinese origins to a worldwide phenomenon.

Paper currency was first used in China as early as AD 1000. It was the Chinese who first printed a value on a piece of paper and persuaded everyone that it was worth what it said it was. The whole modern banking system of paper and credit is built on this one simple act of faith. The Chinese had invented both paper and block printing, and this allowed the printing of paper money.

The Chinese writing along the top of this Ming dynasty banknote reads (from right to left): ‘Da Ming tong xing bao chao’ and translates as ‘Great Ming Circulating Treasure Note’. You can find out more about it here. 

The Ming were the first Chinese dynasty to try to totally replace coins with paper money. After seizing power from the Mongol rulers of China in 1368, the rulers of the Ming dynasty tried to reinstate bronze coins. However, there was not enough metal available for this, and paper money, made of mulberry bark, was produced from 1375. Paper money continued to be issued throughout the Ming dynasty, but inflation quickly eroded its value. The effect of inflation was so devastating that paper money was regarded with suspicion for many years and it was not until the 1850s that paper money was issued again. 

The first banknotes in Europe were issued in Sweden by the Stockholm Banco, set up in 1656 by merchant Johan Palmstruch. It produced its first notes a few years later, in 1661, as an alternative to the huge and inconvenient copper plate money which was then in circulation in Sweden. Though the designs of these early notes were simple, they were carefully printed on handmade paper. They were given official authority by impressions of several seals, including the seal of the bank, and no less than eight handwritten signatures. Johan Palmstruch’s own signature can be seen here at the top of the list, on the left of the note. The Stockholm Banco was a private business, but it had close connections with the Swedish crown and the government. It was very successful at first, but then lent too much money and issued too many notes without proper backing. Palmstruch was blamed for the difficulties and imprisoned for mismanagement. Despite the failure of his bank, he is remembered now for introducing notes which were passed freely as money, just like the banknotes that we use today.

Bills of exchange evolved with the growth of banking in Europe from the 13th century. Paper money like the banknotes we use today was not then part of everyday currency in the West, but bankers and merchants did use written records for settling payments, especially in trade. In their simplest form, bills of exchange were written instructions by one person to an agent, authorising payment to a named individual or firm at a specified future date. They were therefore a convenient way of providing credit or making payments over a distance. In this example, John Emerson in Hamburg has instructed Austin Goodwin, a merchant in Bristol, to pay £380 to Joachim Coldorph in three months’ time. If Coldorph needed money sooner, he might choose to sell the bill to a fourth party at a discounted rate. That buyer would then present the bill for payment in Bristol at the appointed date.

In the mid-19th century, individual banks in the American states issued many different banknotes. This continued during the Civil War (1861–1865), but new paper money issued by the treasuries of the United States in New York and the Confederate States in Richmond reflected the political conflict. In the North, the first public paper money issued under the Constitution of the United States was authorised in July 1861, to finance war with the Confederacy. The back of the notes were printed in green, giving rise to the nickname ‘greenbacks’ for American bills. The colour green was chosen as that colour ink best stuck to the paper. The note shown here is an example of the second issue of 1862. On the front is a portrait of Salmon P Chase, Secretary to the Treasury.

During the First World War (1914–1918) a shortage of coins encouraged towns and regions in several European countries to issue local notes worth small sums. In Germany this Notgeld (‘emergency money’) became popular as a theme for collecting, and by the 1920s these tiny notes were produced in vast numbers with collecting, rather than spending, in mind. Designs on the notes ranged from wartime propaganda to local views or scenes from folklore. This example from the town of Hameln (Hamelin), in bright primary colours, refers to the Pied Piper, the legendary rat catcher who lured the children of the town to their deaths in the 13th century. A whole sequence of notes was issued, each one illustrating a different part of the tale.

The issuing of the £5 polymer banknote, which will bear the portrait of Sir Winston Churchill, means that England joins the growing number of countries who already use polymer technology. The durability and increased security afforded by the plastic notes have made them an attractive proposition to issuing authorities throughout the world from Australia and Nigeria to Brazil and Canada. This image shows a sheet of 32 uncut polymer banknotes printed for Clydesdale Bank in Scotland in 2015.

Discover the history of money in the British Museum’s Citi Money Gallery (Room 68), supported by Citi.