Hi-Ho Silver Certificates
The switch from a commodity money to a bank-debt money can be seen on the U.S. paper money of the twentieth century. Early in the century many of the bills in circulation were silver certificates, which meant that the U.S. government offered to redeem them for silver (a commodity) if anyone wanted them redeemed. (Since the dime, quarter, half and dollar coins were all silver, the government could simply exchange the bill for change.) But this promise to pay in silver was on the bill, as you can see in this picture:
It clearly says: "This certifies that there is on deposit in the Treasury of The United States of America One Dollar in silver payable to the bearer on demand." Contrast this note to a Federal Reserve Note:
Same picture of Washington, same big print, but the fine print is gone! There is nothing backing this bill other than the green on the other side.
(The silver certificates can no longer be redeemed for silver--the Treasury announced a final date on which they would honor the agreement, and it is long past. If a silver certificate is in excellent shape, it may have some value as a collectible. The bill illustrated above is in poor condition, so it is probably only worth a dollar.)
(Another fun fact--it was not until 1963 that the first one dollar Federal Reserve note was issued. Until them almost all of the one-dollar bills were silver certificates.)
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Copyright Robert Schenk