Paper notes representing money were around since the Revolutionary War period, when soldiers were issued certificates redeemable for a sum of gold at war’s end. It was another leap conceptually to go from that to replacing all money with paper notes, backed by the full faith and credit by the United States Treasury but not its gold. But the U.S. – at least the Union side of it – was running rather short on precious metals during the Civil War. There was no other choice – the country had to go off the gold standard.

On this day, March 10, in 1862 the Union issued green-colored, serial-numbered notes, in denominations ranging from $5 to $1000. The Legal Tender Act that authorized their release also made them “legal tender,” meaning creditors had no choice but to take them.

The creation of paper money had the advantage of giving the Union ground to gain over the Confederate States, who were printing their own currency since the outset. The government could make as much money as it wanted to print. The disadvantage was that too much money chasing too few goods made for skyrocketing prices — inflation. But an income tax and steep sales taxes cooled the potential for inflation, and ever since the United States no longer backed their money with gold.