image

Currency

Money, like skilled labor, was in short supply in colonial America. Because the British forbade the minting of coins in North America, official coins were rare. Even as late as 1775, there were seventeen different forms of money being used in North Carolina alone. In fact, most purchases were obtained on credit, with the expectation that payment would come later. As a result, legal tender came in many forms as people tried to come up with a medium of exchange. Currency adopted by the colonists included wampum and furs. Wampum was a form of Native American money made of pieces of clamshell strung together in lengths varying from a few inches to 6 feet. Furs, including beaver pelts, were worth 10 shillings a pound in 1631. According to Glyn Davies, in 1637, Massachusetts declared “white wampum legal tender for sums up to one shilling, a limit raised substantially in 1643.” And, in 1664, Peter Stuyvesant “arranged a loan in wampum worth over 5,000 guilders for paying the wages of workers constructing the New York citadel.” In 1760, J. W. Campbell built a factory for assembling wampum in New Jersey; this factory remained in operation for 100 years. Other forms of legal tender included cash crops such as tobacco, rice, indigo, wheat, or corn. Tobacco leaves were used, as well as tobacco “notes,” which could be exchanged more easily than leaves. Adopted in Virginia in 1727, this form of currency remained legal for more than 200 years. Unfortunately, at times tobacco’s overabundance created a depressing effect on the value of its exchange. Cut nails were also used in many places, with 100 nails equaling 10 pence. Paper currency in colonial America was hard to come by, differed from colony to colony, and fluctuated drastically in value. This five-pound note was issued in New York in 1759. (Brown Brothers, Sterling, Pennsylvania) Foreign money, especially French or Spanish, was commonly used throughout the colonies, but it was spent most often on imported goods, because importers refused to accept anything but hard coin. In fact, the English word “dollar” came from a Germanic word, “thaler,” which identified a large silver coin minted during the fifteenth century in Austria. In English, the word came to be used to identify any silver coins of similar size, particularly Spanish coins. The Spanish dollar, often called a “piece of eight” because it was cut into eight pieces or bits in order to make change, formed the most common basis for calculating the value of other money. It normally equaled 4 shillings 6 pence in British sterling. It was also the price of most buckskins; thus the term “buck” came to mean a dollar. Other early coins were minted in spite of the British ban, but they varied in size, denomination, and value. In Massachusetts, the silver Pine Tree shilling was minted from 1652 to 1684 in the first colonial mint opened in Boston. Because the die for the coin was never altered, this coin always bore the same date. Massachusetts Bay was the first colony to issue paper currency, doing so when it was faced with the need to pay soldiers as they returned from fighting in Quebec. In defiance of English law, other colonies soon followed suit. These notes were also known as “bills of credit” and implied to their holders that they could be redeemed at a later time for gold or silver. The notes were used to pay taxes and could be used as legal tender, but their value fluctuated greatly, to the point where some depreciated so much as to be worthless. In 1718, petitioners to the General Assembly in Philadelphia sought to make produce the basis of official transactions, but their petition was denied. By 1720, however, with a depression looming, Jonathan Dickinson, a merchant and politician, and Thomas Griffitts, a merchant, recognized that without some kind of proper currency, the colony would continue to suffer economically. In 1721, Francis Rawle published a pamphlet encouraging the circulation of paper money as a way to stimulate the economy. As a result, the assembly passed Pennsylvania’s first paper money act in 1723, releasing 15,000 pounds in bills of credit. The assembly later enacted three more paper-money laws. The lack of a common currency eventually gave rise to conflict and disagreement. In 1740, A Discourse Concerning the Currencies of the British Plantations in America, Especially with Regard to Their Paper Money, written by William Douglass, appeared in Boston. In it, Douglass asserted: Silver itself is a Merchandize, and being the least variable of all others, is by general consent made the Medium of Trade … a trading Country must have regard to the universal commercial Medium, which is Silver; or cheat, and trade to a Disadvantage. It is true, that in some Countries of Europe Billon (a base mixture of Metals) is used for small Change, but not as a Medium of Trade…. There can therefore be no other proper Medium of Trade, but Silver, or Bills of Exchange and Notes of Hand payable in Silver at certain … Periods…. The British Plantations have not only varied, from Sterling, but have also very much varied from one another; to the Confusion of Business, and Damage of the Merchant. Another early advocate of a common currency was Benjamin Franklin, who published his Modest Enquiry into the Nature and Necessity of a Paper Currency in 1729. In this discourse, Franklin applauded the efforts of the Pennsylvania Land Bank, which released a series of notes as well as loans “in the form of paper money secured by mortgages on the property of the borrowers.” This kind of early bank was not the same as institutional banks of today; in fact, the term “bank” simply meant the batch of bills issued to the borrower. It wouldn’t be until Alexander Hamilton introduced the concept of a national bank in 1790 that banking would take on greater importance. Franklin also appeared before Parliament in London in 1766 in an effort to convince the British government that the colonies needed an official currency. The Crown’s refusal to consider the matter became a constant source of tension and a factor in provoking the American Revolution. Introduction of the American Dollar It was the colony of Maryland that first introduced the dollar as its unit of paper money; in prior years, because its neighboring colonies had given greater exchange to their paper currency, Maryland suffered in the exchange. In 1767, Maryland began printing paper money in $1 units, as well as in multiples and fractions of a dollar. The value of the money was backed by the Spanish dollar. Though still confusing, this uniform system was the first of its kind and provided the colony’s citizens with a fairly stable form of exchange. Maryland even used secret marks on its currency as a way of deterring counterfeiting, although this did not prove very successful. In 1770 and 1774, Maryland reissued its currency, using the same denominations and designs. The face of the Maryland $1 note carried the name of the engraver, Thomas Sparrow, along the top border and the initials of Jonas Green, the printer, on the back. This formal monetary unit survived until the Revolutionary War. In 1775, the dollar designation was adopted by the Continental Congress, and, in 1792, it was adopted by the U.S. Congress. With the American Revolution, funding for supplies and troops became an important issue for the colonies. Early in the war, the Continental Congress took out huge loans from France and Spain, totaling $9 million. It also began issuing paper dollars, called “continentals.” Backed by little more than good faith, the millions of continentals in circulation were worth not even one-fortieth of their original value by 1780, and Congress had to accept payments due from individual states in the worthless notes. To make matters worse, individual states began printing their own paper money despite protests by Congress, eventually releasing more than $200 million in currency. By 1781, a coin shilling was worth seventy-five times more than a paper shilling, and one state, Massachusetts, voted to outlaw paper money, requiring all debts to be paid in coin. This move especially hurt farmers, and many had to sell their farms. Discontented farmers demanded tax relief and a moratorium on debt collection. When these demands were ignored, Daniel Shays, a former captain in the Continental army, led a ragtag army of farmers in a revolt, often called Shays’ Rebellion. Though the rebellion was put down, it resulted in a push to make the new federal government stronger and more capable of providing economic relief and direction. A national coinage system was established in 1785, but few coins appeared before 1793. The first coin struck for the United States was the Fugio cent. On one side, thirteen circles represented the new union; on the other side was the image of a sundial and the word “fugio,” to show that “time flies.” The motto “Mind your business” was also stamped on the coin. Later, this motto was changed to “In God we trust,” as suggested by Ben Franklin. Gail L. Jenner See also: Banks and Banking; Currency Act (1764). Bibliography Douglass, William. “Discourse on the Currencies of the American Plantations.” 1740. University of Virginia. etext.lib.virginia.edu/users/brock/webdoc2.html. Newman, Eric P. “The Earliest Money Using the Dollar as a Unit of Value.” www.chicagocoinclub.org/projects/PiN/ted.html. Purvis, Thomas L. Revolutionary America, 1763 to 1800. New York: Facts on File, 1995. Currency Wars, What Are They Good For? Absolutely Ending … U.S. Currency for Kids « What is foreign currency exchange rates and how Currency …

Leave a Reply

Your email address will not be published. Required fields are marked *