Greenback: Definition, Origin, and History

What is a greenback?

“Greenback” is a historical slang term for U.S. paper dollars. The name comes from the green ink used on the backs of early U.S. paper notes. Today the term is still used informally—especially in foreign-exchange and financial contexts—to refer to the U.S. dollar.

Origin and early history

During the U.S. Civil War, the federal government faced severe funding shortfalls. To cover military expenses and government payrolls, the government issued paper currency in two main stages:

• Demand notes (1861–1862): Issued first to pay salaries and immediate expenses. These notes were not legal tender, so private parties could refuse them.
• Legal tender paper notes (from 1862): Enacted by the Legal Tender Act of February 1862, these notes became the government’s official paper currency and gradually replaced demand notes.

The new notes were backed by the government in the sense that they were declared acceptable for public and private debts, but they were not convertible into gold or silver. Because of that lack of specie backing, public confidence and market acceptance varied.

Why bankers opposed greenbacks

Many bankers opposed government-issued paper currency because it brought federal authority directly into money markets and posed risks if the war went badly. Banks had already issued their own notes in excess of coin reserves, and a large federal issue raised fears of inflation and financial instability.

Value fluctuations and economic effects

The government issued a large volume of paper currency—about $400 million—to fund the war. That scale, combined with the notes’ nonconvertibility, led to significant value swings and inflation:

• The greenback depreciated relative to gold as the war progressed, reaching a low point in 1864 (historical accounts cite figures around 258 greenbacks = 100 gold).
• After the war ended in 1865, the value improved (for example, recovering to roughly 150 greenbacks = 100 gold).
• Inflation rose sharply during the war years—estimates show prices increasing substantially, with double-digit annual inflation in the early 1860s.
• Greenbacks financed a meaningful portion of the war (commonly cited around 15% of war costs).

Because acceptance by banks and private parties varied, the practical purchasing power of greenbacks depended on confidence in the Union’s prospects and on local market conditions.

Legacy

Greenbacks marked a turning point in American monetary history by demonstrating the federal government’s ability to issue national paper currency. The experience influenced later debates over currency backing, federal banking policy, and the eventual return to specie convertibility in later decades. The term itself remains part of financial vernacular as a casual name for U.S. dollars.

Key takeaways

• “Greenback” refers to U.S. paper dollars, named for green ink on early notes.
• Issued during the Civil War as demand notes (1861–62) and then legal tender paper notes (from 1862).
• Not convertible into gold or silver, which contributed to depreciation against gold and wartime inflation.
• Funded a substantial share of Civil War expenses and helped shape U.S. monetary policy going forward.
• Today the word is still used informally to mean the U.S. dollar.