One notable exception to what had become the accepted requirements for issuing bank
notes occurred during the nineteenth century in the USA. As the Civil War got underway
in 1861, the US government suspended the convertibility of bank notes and issued
a currency—the greenback—that was not convertible into specie. The greenback’s value
depended on the law that made it legal tender and required that it be accepted for payment
of debts and taxes.While the US reinstated both gold and silver as backing for private bank
notes in 1879 (Dam, 1982), it suspended convertibility a second time during the banking
crisis in 1933 and gradually lowered the required gold backing for Federal Reserve notes
until, in the 1940s, it was removed altogether and the US currency became fiat money.