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This rare 1918 $500 Chicago Federal Reserve Note recently came through the PCGS Banknote grading room, earning a grade of Very Fine 30. Courtesy of PCGS. Click image to enlarge.

This rare 1918 $500 Chicago Federal Reserve Note recently came through the PCGS Banknote grading room, earning a grade of Very Fine 30. Courtesy of PCGS. Click image to enlarge.

Very few actors within the theater of American numismatics possess the combined level of fanfare, flair, and face value as high-denomination banknotes – especially those sporting the earlier, large-format designs displayed on problem-free paper, sans defect or distraction. Whenever such an example begins to make its journey through the various stations of the prestigious PCGS Banknote grading room, team members oftentimes gather around to admire and issue acclaim before allowing others outside the room the chance to swing by and pay their rightful homage. This Series 1918 $500 Chicago Federal Reserve Note, graded by PCGS Banknote as Very Fine (VF) 30, recently received this fitting hero’s welcome and has been deservedly chosen as the subject of this edition’s Noteworthy Notes feature.

Among banknote collectors just starting out and those who may specialize in coins but are seeking to better inform themselves about their paper-made counterparts, federally issued high-denomination banknotes tend to immediately beg a few commonly asked questions. It’s a characteristic that augments their overall appeal and collectability. I will attempt to satiate the better part of this instinctive curiosity right off the bat. So here it goes…

Yes! Any banknote – including all high denominations – issued by the United States since 1861 is still legally worth the amount of money indicated by its inked design and can be bank-deposited or merchant-spent as such (although current collector value at this point would, of course, far exceed that amount, and doing so would be blatantly foolhardy). And no! High-denomination banknotes – defined as anything with face value over $100 – are no longer printed by the Bureau of Engraving and Printing and issued by the United States Federal Reserve, our nation’s authoritative central bank. As strange as these banknotes look and feel to our senses in this day and age, this remains bona fide cash money; although, due to their obsolete status, the act of depositing or spending one would assuredly subject it to the paper-shredding blades of the Federal Reserve system downstream.

The Federal Reserve Act of December 23, 1913, brought the latest and greatest form of United States currency with its Federal Reserve Notes, a type of paper money that succeeded (while also running concurrently to) Legal Tender Notes, Silver Certificates, Gold Certificates, and a few other categories of banknotes that dominated the latter half of the 19th century. These new designs of “Feds” had to be built from the ground up – lower denominations ($5 through $100) as part of the series of 1914 and the high denominations ($500 through $10,000) as part of the series of 1918. The $500 design – listed as note #89 by Q. David Bowers and David M. Sundman in their 2006 publication 100 Greatest American Currency Notes – features a striking portrait of the fourth Chief Justice of the United States Supreme Court John Marshall at the center of the note’s face; the back of the note carries an ornate vignette of Spanish explorer Hernando de Soto surveying the Mississippi River.

If you think $500 is a lot of money today, you’d be shocked to learn what it would have represented in 1918. Based on inflation rates compounded over the last hundred or so years, this note had purchasing power back then equivalent to over $10,000 today! The towering payment potential of high-denomination banknotes was the ultimate reason for the Treasury Department’s decision to discontinue them entirely in the late 1960s after a lengthy period of passive retirement. Simply put, high-denomination banknotes were known to facilitate illicit activities and enable tax avoidance.

Based on the emergent popularity of small-size, high-denomination banknotes – with countless examples recently reaching five and even six figures at public auction – these large-size, high denominations, with their relatively low census statistics, seem underrated and undervalued. This example was sold earlier this year by Heritage Auctions for $19,200 – a hefty price that still feels like a pretty darn good deal.