I found reading John Anderson's history of banking in Enumclaw to be very interesting (see my earlier post Enumclaw - A Family Town Circa 1904). It motivated me to learn a little more about banking here in the northwest.
The history of banking and currency has been quite the roller coaster ride. First it was all about precious metals such as gold and silver. Limited in supply and hard to find, coins could be minted in different denominations measurable by weight and transferable. Easy - except they weigh a lot and aren't quite so easy or safe to handle. They were anything but secure in pouches carried by travelers or stashed away under the bed.
No problem - let's establish banks where you can both deposit and borrow money. Rather than transact business by trading gold and silver coins, let the banks do business by issuing "promises to pay" backed by the security of gold and silver and let them print their own bank notes. This was how business was conducted in the early 1900's.
Image courtesy Washington State Historical Society, 1980.76.1, circa 1929
The bank note you see above was issued by the National Bank of Tacoma. We also had State Banks in addition to National Banks and even business associations printed their own promise to pay currencies. This didn't always work so well as we found out in Black Diamond when the president of the bank absconded with miners' money (grand larceny) and also during the great depression. There were no banks anymore in some locations.
Image courtesy Washington State Historical Society, C1954.291.4, circa 1933
Don't like Tenino wood currency - try some Prosser New Deal Money.
Image courtesy Washington State Historical Society, 2018.1.24, circa 1933
No pretense of security. Just "good faith". Eventually, of course, the country worked through the great depression and the federal government created the federal reserve system and federally printed script became the currency of choice. The fed also began issuing unsecured war bonds.
One role for the federal reserve was printing and processing script. The following photo shows an employee with the Federal Reserve Bank in Seattle in 1954.
Photo courtesy University of Washington Libraries, 2000.107.165.11.02, circa 1954
Now, of course, script plays a much reduced role in commercial transactions and banking is an electronic business.
Oops, the great recession. Too small to succeed and too big to fail. Hmmmm
We can always use IOU's again (aka debit cards like you can buy in your neighborhood grocery store) or you can buy bitcoins. More about bitcoins in a future post. Fascinating.