Currency is term designating all the circulating media of exchange of a country. In this sense, a currency includes coins and paper money. The term sometimes includes credit instruments. Coins are generally designated as metallic currency, and paper money and credit instruments, as paper currency. Further distinctions are made in the latter classification: Government notes are called government currency; bank notes are designated as bank currency; and checks drawn on bank deposits are called deposit currency.
This use of the term currency is of comparatively recent origin, dating from the period following World War I. Earlier uses of the term were more restricted. In countries in which the governments did not issue paper money, the term paper currency was applied exclusively to bank notes. In the United States and a number of other countries, on the contrary, the application of the term currency was limited to government-issued, legal-tender paper money.
The change from the earlier, restricted meanings of the term to its modern significance resulted in part from the great increase, following World War I, in the use of credit instruments.
In the early days of this nation, before and just after the American Revolution, Americans used English, Spanish, and French currencies. The Massachusetts Bay Colony issued the first paper money in the colonies which would later form the United States. American colonists issued paper currency for the Continental Congress to finance the Revolutionary War. The notes were backed by the "anticipation" of tax revenues. Without solid backing and easily counterfeited, the notes quickly became devalued, giving rise to the phrase "not worth a Continental." The Continental Congress chartered the Bank of North America in Philadelphia as the nation's first "real" bank to give further support to the Revolutionary War. Continental Congress adopted the dollar as the unit for national...