Republic authorizes mercantile firm to issue money
On this day in 1841, the Republic of Texas Congress authorized the firm of McKinney, Williams and Company to issue notes for circulation as money, using for security mortgages on real estate, slaves, and a sawmill. This desperate measure reflected the history of money in the republic, where the various issues of currency--including "exchequer bills," "interest notes," and "red backs"--all were textbook examples of "fiat money," or paper money not redeemable in specie. The republic issued a total of $4,095,990 in paper money. Until the approach of annexation, government-issued currency was typified by Sam Houston's promissory notes of 1837, called "Star Money" because they were decorated with a star. Houston printed this money "to avoid the absolute dissolution of the Government." Measured against United States dollars, red backs (issued by the Lamar administration in 1839) started with a value of 37½ cents and fell to two cents before expiring completely. Other currencies underwent a similar, if less dire, inflation, and citizens--especially government employees, who were paid in these currencies--suffered accordingly. Rich in natural resources, poor in manufactured goods, and chronically depleted of silver and gold (which had to be paid for imports), the Republic of Texas sorely needed the economic blessings that came with annexation to the United States.