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- The rupee weakened sharply against the US dollar amid sparse trading volumes as some foreign banks purchased the greenback.
What Is a Greenback?
- A greenback is a colloquial term for U.S. paper dollars. The term originated during the mid-1860s, when these notes were printed in green ink. Congress had limited taxing authority, and used paper currency to help finance the civil war.
The 37th Congress (1861–1863) faced a financial crisis in 1862, as spiraling costs of war rapidly depleted the Union’s reserves of gold and silver coin, the only legal tender of the United States. After intense debate, Congress authorized the issuance of paper U.S. Notes (popularly called “greenbacks”), declaring them lawful money for all payments except interest on public debt and import duties.
- The notes, though not redeemable for gold or silver, were lawful money backed by the credit of the federal government.
- The word "greenback" was a negative term because these notes did not have secure financial backing and banks were reluctant to give customers the full value of the dollar.
- Because they were not fully backed by gold, greenbacks lost value and caused inflation in the northern economy.
- These were later replaced in the Legal Tender Act of 1862, which authorized the paper notes that would eventually become the official currency.