How the Republic of Texas began its Paper Money Career...
Texas’ roots have a rich and fascinating history that has become the subject of many Hollywood movies. But what many people don’t know is that after the Texas Revolution, as Texas became a republic and independent from Mexico’s rule, it was plagued with money troubles and was in such debt that the problem lasted for its entire existence. To Texans of the period, money meant coins and notes, since neither an incorporated nor a private bank operated in Texas during the entire period of the republic. Imports exceeded exports, and the adverse trade balance drained out gold, silver, and other money that was acceptable abroad. It was the Constitution of the Republic of Texas that gave it's Congress the “Power to Coin Money, regulate the value thereof and of foreign coins" and provided that "nothing but gold and silver coins shall be made a lawful tender." The Texas Congress also provided that the standard value of gold and silver coins should be the same as in the United States, but no coins were ever minted by, or for, the republic. At that time metallic money was scarce in the United States and it was even more scarce in Texas.
In the early days of the Republic of Texas, a variety of currencies served as cash, including Spanish and Mexican money, banknotes from various U.S. states, and currency issued by private companies called “shinplasters”. Shinplaster was a common name for paper money widely used in the frontier economies of the 19th century. The term is said to have arisen during the Revolutionary war for its resemblance to, and suitability for makeshift use as, a bandage for dressing the shin. These notes came from various places and were issued by banks, merchants, wealthy individuals and associations, either as banknotes, or circulating IOUs.
The Republic of Texas first issued its own paper money in 1837. In fact, it was the act of June 12, 1837, which authorized an issue of $500,000 of promissory notes, started the republic on its paper money career. This currency was called "star money" named for the depiction of a small five-pointed star in the center of the upper part of the face of the note. Star money was not actually face value currency, but rather interest-bearing notes (similar to a treasury bill) that circulated by being endorsed over to the next payee. The denominations issued were $1 $2, $3, $5, $10, $20, $50, $100 and $500. But with no design on the back and poor print quality, star money was easily and widely counterfeited.
For a short time in 1838, Texas issued change notes with elaborate designs on the front and blank backs. It wasn’t until 1839 the so-called Texas "redbacks" were issued. They were referred to as "redbacks" because of the ornate red designs printed on the backside of the bills, this added feature helped deter counterfeiting. The government printed over two million dollars in redbacks, which were initially worth about 37 cents to a U.S. dollar. The redbacks were issued in the denominations of $5, $10, $20, $50, $100, and $500 bills. An interesting side note is that many of the notes actually appeared as a burnt orange-colored because of the low quality of the ink. Rumors have circulated for years that the color was the inspiration for the famous burnt orange used by University of Texas.
By 1842, the redbacks had become virtually worthless and had lost the power of legal tender. The Republic of Texas had little in the way of silver and gold and never minted any coins. If you have never actually seen an authentic Texas redback, they are very ornate in the design and very collectible. It’s like touching a piece of Texas History. But beware, these historic bills have been reproduced as a novelty item and replicas are very common. You can tell by the quality of the paper used for printing along with the serial numbers.