On this day in 1862, the U.S. first issued Legal Tender Notes, or U.S. notes. Paper money was first issued during the Revolutionary War by colonial governments, but some of the money was readily exchanged for goods and some was not. During the war, the Continental Congress issued bills called "Continentals." But with no firm backing for the money, the bills essentially became worthless.
In 1862, the federal government issued Legal Tender notes. These new notes - issued in denominations from $1 to $1000 (and later in $5000 and $10,000) - were the first national currency used as legal tender for most public and private debts. In 1913, the Federal Reserve Act was passed to regulate the flow of money and stabilize the economy. These Federal Reserve Notes issued in 1914 make up more than 99% of today's paper money.