When Banks Were Able to Print Their Own Money, Literally

Oct. 19 (Bloomberg) -- In 2012, it isn’t unusual to go dayswithout using actual money: Lunch goes on the debit card, aclothing purchase goes on the credit card and in some citieseven parking meters take plastic. As the Internet andinstruments of credit continue to transform our relationshipwith money, it is worth reflecting on the forms that money hastaken in the past.

Before the institution of federally backed paper currencyin 1862, the government didn’t see issuing paper money as itsresponsibility. Although it coined gold and silver, there wasnever enough in circulation to provide an effective medium ofexchange. Because the Constitution prohibited states fromprinting money, banks became the primary suppliers of papermoney in the U.S.