Cutting notes into two or more pieces has seemed the answer to monetary and financial difficulties in more than one situation.
Immediately following World War II, the government of Finland, strapped for resources, bisected notes in denominations of 500, 1,000, and 5,000 markkaa. The left halves of the notes continued to circulate at half of the original face value, without any type of government overstamp, and the right halves became a forced loan to the government.
Greece implemented a similar expedient on two occasions. In 1915 the 100-drachma note was cut into a 75 drachmai and 25 drachmai note, mainly to meet a shortage of small change. In 1925 the Greek government bisected notes as a means of raising a forced loan. Similar to the Finnish episode, the Greek government bisected circulating notes, letting one half of each note circulate at half of its original face value and holding the other half as a loan certificate. These bisected notes also circulated without a government overstamp or overprint signifying their new value.
In 1944 Colombia faced a shortage of small change because people were hoarding coins to sell to tourists at inflated prices and to convert into buttons. The Banco de la Republica de Columbia withdrew one-peso notes dated 1942 and 1943, bisected the notes, overprinted each half note as now equal to a half peso, and recirculated the half pesos.
Toward the close of World War I officials of the Ottoman Empire cut one-livre bank notes into quarters, each equaling one-quarter of a livre. New denominations and signatures were overprinted on each note. The one-quarter-livre notes were apparently needed to meet the need for small change.
With the onset of World War I, Australia faced difficulty shipping currency to the 740 or so Fanning Islands. Virtually everyone on the islands was in the employ of Fanning Island Plantation Limited, a company engaged in exporting coconuts. The local manager of the plantation, with the aid of the United States military, arranged to have one-pound “plantation notes” printed in Hawaii and delivered to the islands. At the end of the war, Australian currency again circulated on the island, and most of the plantation notes were withdrawn, but some were bisected and used as movie tickets. The left half bore a one-shilling mark and the right half bore a two-shilling mark, reflecting the cost of attending movies on the islands.
The Bank of England has bisected notes as a security measure. After 1948 the new state of Israel sent bisected bank notes to the Bank of England for redemption. The notes were bisected and sent in two separate shipments, as protection against robbery.
The common theme in the history of bisected paper money is the exigencies of war. Bisected notes either replace disappearing small coinage or enable the government to arrange a forced loan on the government’s terms. The bisection of notes as protection against robbery does not affect money in circulation. It therefore is not a tool of monetary policy, but only a detail of handling banking operations.