Creation of Colonial Money

In spite of Britain’s ban on issuing money, however, and without banks to offer credit or loans, several colonies went ahead and devised their own money. Unfortunately, it was rarely accepted or redeemable in other colonies. As Franklin later wrote in his autobiography, The colonies would gladly have borne the little tax on tea and other matters, had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction. The inability of the colonists to get power to issue their own money permanently out of the hands of George III and the International Bankers was the Prime reason for the Revolutionary War. Clearly, not only was there a great need for a form of standardized and universal currency within the colonies, there was also a growing need for banks that could provide venture capital and secure loans to individuals. However, even as late as 1775, the few lending institutions that did exist were not the kind that we know today. Most were land banks, which required land as collateral. Moreover, the Bank of England, now a century old, was not a place where colonists went for investment purposes. Their distrust of all things British was most evident in their disdain for its institutions. These early banks, many of them private institutions, did offer a place to store money. Many also made loans, but there was no uniform code of standards, no rules by which they were held accountable. There was also no consistency in the type or management of loans. Bills of credit were often signed over to the next merchant or manufacturer and could be passed on and on, down the line, almost as a form of specie. Debt followed the bills until, perhaps, the last bearer turned and sued for payment, unleashing a flurry of letters and sometimes a chain of lawsuits until all debts, once thought canceled, were again made good. Sometimes payment never found its way to the last payee. As a result, most individuals looking for credit or loans sought the assistance of private lenders such as merchants. In this way, merchant capitalists became the primary source of money or credit throughout the colonies for a span of time. Many of these wealthy merchants, along with a number of Southern landowners, eventually emerged as leaders in the rebellion against the British. One such patriot merchant was Robert Morris, of Philadelphia. Having signed the Non-Importation Agreement in 1765, an act that attempted to force the repeal of the Stamp Act and other taxes, Morris quickly joined the growing throng of revolutionaries who opposed Britain’s control over every aspect of colonial life. He served as a delegate to the Second Continental Congress, where he contracted for equipment needed by the Continental army, from which his firm, Willing, Morris & Company, benefited by the contracts drawn up with the emerging American government. Later appointed superintendent of finance in 1781, he helped create the Bank of North America. Stephen Gerard, another private banker, was also America’s wealthiest shipping merchant. Philadelphia merchant Robert Morris was known as the financier of the American Revolution for his role in securing materiel and financial assistance. Congress named him superintendent of finance, in which capacity he helped found the Bank of North America. (Library of Congress, LC-USZ62-3596) The banking activity these colonial merchants engaged in became a lucrative enterprise, but it still left many prospective borrowers without a way to obtain credit or loans. Even the Continental Congress, when it chose to finance Washington’s Army, turned to issuing notes or bills of credit in increasing quantities, because the contributions made by the individual states were not enough to finance a war. One of the first orders of business for the newly formed United States under the Constitution was the appointment of Alexander Hamilton as the first secretary of the treasury and the formulation of a sound economic policy. Gail L. Jenner See also: Currency; Economy, Business, and Labor (Chronology); Economy, Business, and Labor (Essay); Document: A Modest Enquiry into the Nature and Necessity of a Paper Currency (1729). Bibliography Davis, Andrew McFarland. “Currency and Banking in the Province of the Massachusetts Bay Colony.” Todd, Lewis Paul, and Merle Curti. Rise of the American Nation. New York: Harcourt Brace Jovanovich, 1982. Wright, Robert E. “Commercial Banking in Colonial America.” Early American currency – Wikipedia, the free encyclopedia 900600p2678EDNmainQDBBlogObsCurr1Jun12.jpg Marbled Edge Continental Currency Challenged British …

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