Fractional currency, called "Postal Currency" on the first issues because of the perforations and stamp facsimiles applied to them, was produced longer (1862-1876) than people
realize. The perforations made the notes difficult to separate (it wasn't the same paper as postage stamps) and also was too costly and time consuming to perforate. It was abandoned early in the first
issues. It is difficult to locate CU (uncirculated) samples of these perforated notes with good perforations because of this and pricing increases greatly as quality improves.
Fractional currency came about
during the Civil War, small change [coins] was very difficult to come by due to hoarding, and people started using postage stamps as coins. This proved to be a disaster at best, they were easily lost, stuck
together, and were worn out quickly. This ordeal led to development of coin-like holders, now known as "Encased Postage Stamps" to contain the stamps with see-through mica windows [a clear mineral actually that
could be separated into thin sheets] to view the stamp. They were invented by John Gault in 1862. This was not altogether profitable in some cases, for instance the creation of a "One Cent" encased stamp actually
cost the merchant 2 cents for the holder and one cent for the stamp. The merchants preferred to use the higher value stamps to avoid this issue, but some smaller change was still necessary so they were produced
anyway. This also was a disaster, the mica windows cracked and the stamps became dirty and illegible or just fell out. All these problems led to the creation of "Fractional Currency". Over 369 million
dollars of these notes were printed, about 2 million dollars are still outstanding, most probably lost or damaged beyond recognition.
The flood of silver from the "Comstock Lode" in the late 1870's helped to
bring the price of silver down to a level which made silver coins worth more to import back into the United States and this helped alleviate the shortages of coinage.
Personal Collection of Craig Rathkamp WINS #4
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