Greenback

Greenback, popular name for the paper currency issued by the federal government during the American Civil War to facilitate the payment of war expenses; it was so called because the reverse side of each note was printed in green ink. This action by the government constituted the first issue of legal tender notes since the adoption of the U.S. Constitution in 1787. The law authorizing this currency, passed in February 1862, provided for an issue in the amount of $150 million. Further issues totaling $300 million were authorized in July 1862, and March 1863.

The greenbacks were not backed by gold reserves, and their market value began to depreciate almost immediately after issuance. Thus, they contributed to a sharp inflation of the entire economy. In 1866 an act was passed providing for the gradual retirement of the greenbacks. It was repealed two years later, however, and the notes continued to circulate without gold reserve backing until 1879. In that year, when the amount of greenback currency in circulation was about $347 million, the greenbacks were made redeemable in gold; thereafter they circulated on the same basis as all other forms of legal tender.