Colonial Currency - Continental Currency
The first paper money to circulate in the United States was issued in the Colonial era. The assemblies of all original 13 Colonies issued small square-ish notes valued in either English Pounds or in Spanish milled dollars. Due to British mercantile policies, there was always a shortage of precious- metal coinage in the colonies and these notes helped fill the void.
During the Revolutionary War, the governors and legislatures of the newly independent states continued to print paper money, as did the Continental Congress. Unfortunately, printing un-backed paper currency is inflationary. This situation worsened when the public realized that redeeming the money for real silver or gold varied from difficult to impossible. Rapid inflation soon caused these notes to be devalued, and they traded at a sharp discount. Continental currency issued by the Congress had such a poor reputation that the saying "Not worth a Continental" sprang up. The slang term "shinplasters" for these notes also implies their worthlessness, recalling how 1700s Americans would stick them in their boots to keep warm.
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There are many interesting aspects to American paper currency of the 18th century. The most fascinating was a unique form of printing whereby an actual leaf was used in the printing process, producing fine detail difficult to artificially duplicate. This was intended to deter counterfeiting, as was the saying, "To counterfeit is death" featured on so many notes. Each note bore a hand signature. This is of particular interest to the historian, as many of these signers were either then or soon to be important people. Some became signers of the Declaration of Independence or the Constitution. Signatures of historical figures add to the value of a note. There is also the quaint 18th-century habit of sewing together, instead of gluing, torn notes. Those notes that were ultimately redeemed were not always destroyed. Sometimes they were cancelled by either cutting an X into them or by cutting out a round hold. These notes, particularly the latter, are today sold at a discount.
Known Counterfeits: The most common counterfeits are those made during the mid-20th century as souvenirs and novelty items. They can be identified by their crackly, brownish-yellow paper. Real notes are printed on thick, soft white paper with a coarse grain. Contemporary counterfeits made to spend at the time are known and are collectible. Serious counterfeits meant to fool collectors are less common.