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The Monetary History of 
the United States 




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3tt0U0tu0 % ISudt 







The three essays in this volume are based upon 
a part of the materials that the author collected 
some years ago, when lecturing upon the mone- 
tary and financial history of the United States. 
They are now published in the hope that they will 
prove to be of some value to students and investi- 
gators in this field. The author desires to make 
grateful acknowledgment of the constant aid re- 
ceived from his wife, who has devoted several 
months to the work of gathering materials and 
assisting in the preparation of the book. 


August, 1900. 





I. Introduction i 

II. Wampum and Barter Currency 

III. Silver and Gold Currencies 

IV. Colonial Paper Money 
i — V. Continental Paper Money . 

VI. State Banks of Issue . 

VII. A Return to Government Paper Money 

VIII. Gold and Silver 







I. Early Issues (1712-1748) . . . .125 

II. The Last Colonial Issues (i 749-1 774) . 156 

III. The Last Issues (i 775-1 788) . . .184 





I. Colonial Issues (i 709-1 739) . . . 207 

II. Colonial Issues (1740-1774) . . . 232 

III. Revolutionary Issues (i 775-1788) . . 260 

Bibliography 275 

Index 289 

Part I 




At the present day, after all the discussion that 
has occurred upon the subject, it is certainly diffi- 
cult to present anything that is wholly new or origi- 
nal concerning the monetary problems that have 
vexed the United States. But it may prove worth 
cm" while to undertake to review and interpret 
familiar historical events in the light of certain 
primary facts, the full significance of which has 
seldom been appreciated in sufficient measure. 
These facts are, first, that a strong movement in ^ 
favor of cheap money has existed continuously in 
this country from the earliest period of coloniza- 
tion ; and, second, that the persistence of such an / 
agitation has been due, more than to any other 
single cause, to the constant spread of settlements 
westward over large areas that have long remained 
thinly populated. With the growth of numbers, 
the rise of manufacturing and commercial indus- 
tries, and the increase of wealth, the desire for a 
cheap currency has gradually diminished ; but this 
has no sooner taken place in the more populous 
states than the old phenomena have reappeared in 
newly settled districts, while any localities that 


have remained sparsely peopled and devoted 
chiefly to agricultural pursuits have always fur- 
nished a favorable field for the old propagandaN 

Back of all the strivings for an inexpensive 
medium of exchange, each generation of our 
people has always heard the complaint that our 
supply of money has been insufficient ; ^ and this 
cry has invariably furnished an unmistakable indi- 
cation of the* underlying cause of the agitation. 
"No complaint," wrote Adam Smith, in 1776, "is 
more common than that of a scarcity of money. 
Money, like wine, must always be scarce with 
those who have neither wherewithal to buy it, nor 
credit to borrow it. Those who have either, will 
seldom be in want either of the money or of the 
wine which they have occasion for."^ In the 

1 One of the earliest of these complaints is found in a resolution 
of the General Court of Massachusetts in the year 1641. It is so 
typical of similar complaints of later times that a part of it may well 
be quoted here : " Whereas many men in the plantation are in debt, 
and heare is not money sufficient to discharge the same, though 
their cattle and goods should bee sould for halfe their worth, as 
e3cperience hath shewed upon some late executions, whereby a 
great part of the people in the country may be undone, and yet 
their debts not satisfied, . . ," The Court then proceeded to grant 
relief to insolvent debtors. Mass. Recs., I. 307. John Winthrop 
wrote that the merchants had brought over " great store of provi- 
sions" in 1640, "so as now all our money was drained from us." 
Winthrop, N. Eng., II. 7. 

^ Smith, W. of N., II. 9. A year or two later John Witherspoon 
wrote : " The cry with many is, we must have paper for a circulat- 
ing medium, as there is such a scarcity of gold and silver. Is this 
just? No. They mistake their own poverty, or the nation's pov- 
erty, for a scarcity of gold and silver ; . . ." Works, IX. 45. 



United States an enterprising and resolute people 
has been engaged, for nearly three centuries, in 
occupying and developing a vast area of free 
land. While natural resources have abounded, 
each newly settled district has always experienced 
a lack of the capital needed to bring the soil under 
cultivation, to supply means of communication, and 
to develop manufacturing enterprises.^ This want 
might have been little felt by a le5s progressive 
people ; but with us it has been a real and serious 
obstacle, which has been removed only by the slow 
gfrowth of wealth and numbers. In order to pos- 
sess a sufficient supply of metallic money, a nation 
must convert a portion of its capital into a stock 
of gold or silver coins or bullion, a process that is 
expensive, even under the most favorable circum- 
stances. In the United States, prior to the dis- 
covery of mines of the precious metals, gold and 
silver could be obtained only through exchange 
with foreign countries; and the acquirement and 
maintenance of an abundant metallic currency was 
made especially difficult by the poverty of our 
people in all sorts of capital. The difficulty was 
intensified still further by the sparseness of settle- 
ment and the economic isolation of households 
and communities, a circumstance which made the 

1 This was well stated by Governor Ward of Rhode Island, in 
1740: "And as the first settlers were not of the wealthiest sort, nor ' 
over-stocked with servants, the greatest part of their money was 
nhavoidably swallowed up in procuring provisions, clothing, and 
utensils for husbandry and labor, to subdue and cultivate the soil." 



monetary circulation sluggish and increased the 
volume of currency required for the transaction of 
a given number of exchanges. The accumulated 
products of our industry were more often con- 
verted into other things than money. Each person 
usually desired to employ in production or ex- 
change whatever gold or silver might come to 
him; for he had many uses for other kinds of 
capital, and could ill afford to keep on hand a 
stock of money that appeared to be an idle invest- 
ment. Therefore it happened that supplies of the 
precious metals secured in trade tended to move 
out of the colonies in exchange for other things 
that were felt to be more necessary. This fact 
explains the circumstance, so often bewailed by 
writers of the seventeenth and eighteenth cen- 
turies, that the balance of trade was commonly 
against the colonies, so that gold and silver seemed 
to take to themselves wings, and to fly out of the 

It may be said that it would have been better 
for the people to have retained enough metallic 
money to furnish an adequate medium of ex- 
change, and this is undoubtedly true. But the 
matter did not appear in this light to the individ- 
ual colonist, who would usually expend his own 
coins for things that were felt to be immediately 
desirable, and would leave to some patriotic neigh- 
bor the task of accumulating a stock of money 
that appeared to be idle capital. In the colonial 
period, the usual outcome was that the attempt to 



maintain a specie currency was abandoned, and some 
less expensive medium was substituted. In later 
times, the poorer 'and less populous regions of 
the country have experienced a similar scarcity 
of gold or silver, and have been equally desirous 
of finding some form of currency that would be 
easier to obtain. The continued growth of new 
commonwealths in the West has served to perpet- 
uate the conditions under which an agitation for 
cheap money was sure to remain with us. 

It is the purpose, then, of this first essay to 
review the entire monetary history of the United 
States in the light of the facts just stated, and to 
show that all the varied currency experiments' 
with which our people have been vexed for nearly 
three centuries have been, first and fundamentally, 
efforts to secure a cheap medium of exchange. 
While it is not claimed that this thesis is entirely 
novel,^ it is believed that the essay is the first 
systematic effort to supply a unitary interpretation 
of the leading facts in the history of American 
currency. The second and third essays contained 
in this volume are primarily investigations into sub- 
jects about which little has been known hitherto. 

1 Professor Sumner has appreciated this fact very clearly. See 
Currency, 5-6 ; Banking, 1-3; also article in First Century, 238- 
259. In the last-mentioned work he says that ** the monetary history 
of the United States from the first colonization until now is a history 
of experiments with cheap substitutes for money." Professor F. J. 
Turner has well shown the similarity between the present silver 
movement in the West and similar agitations of earlier days. 
Atlantic Monthly, LXXIX. 441-442. 



But, since North Carolina and New Hampshire 
remained, up to the very close of the colonial 
period, sparsely settled farming communities in 
which manufactures and commerce were of slight 
importance, they offer a favorable field in which 
to test the thesis which the first essay seeks to 
establish. Thus a real unity of purpose may be 
traced throughout this book, in which, as in most 
collections of essays, no formal unity is to be 




The first immigrants brought into the colonies 
little or no money, since they were poor men and 
needed other forms of capital. Some years were 
to elapse before the new plantations were to de- 
velop any extensive foreign commerce, by means of 
which specie was finally secured ; and a scarcity 
of currency was experienced in the very first years 
of settlement. Accordingly in Virginia, as early|f- 
as 1619, tobacco was made receivable at threelj 
shillings per pound ; while in New Netherland' 
and Massachusetts the settlers utilized peltry 
as a medium of exchange.^ In trading with the 
Indians the colonists learned to use wampum, the 
common Indian currency, and they soon began 
to employ this in their dealings among themselves. 
Thus commenced in this country the quest for a 
cheaper substitutes for metallic money. 

For the Indians, wampum had been a satisfac- ^ 
tory currency.^ It was manufactured largely at 

1 Bruce, II. 498-499; Ripley, no; Fernow, 298; Felt, 11, 
12, 14. 

2 On wampum currency, see Weeden, I. 32-46 ; Bruce, II. 
520-521 ; Amer, Nat., XVII. 468 ; Fernow, 297-299 ; Docs, of 



the eastern end of Long Island, where were found 
" the cockles whereof wampum is made." Much 
labor and patience were required for its produc- 
tion, and "an Indian's utmost manufacture 
amounted only to a few pence a day." But the 
English settlers, with their iron implements, were 
able to incfease the output greatly, especially 
after they settled upon Long Island near "the 
mine of New Netherland." As a result, the wam- 
pum depreciated, so that, in 1649, Massachusetts 
had to prohibit its receipt in payment of taxes, 
although it was allowed to remain a legal tender 
for private debts until 1661. In counterfeiting 
and otherwise deteriorating this rude medium, the 
Indians seem to have learned a few lessons from 
the white men, for we find that complaints came 
to the commissioners of the New England Con- 
federation that "the Indians abused the English 
with false badd and unfinished Peage."^ Troubles 
growing out of the depreciation and counterfeit- 
ing of this currency became especially serious in 
New Netherland, which seems to have received 
much bad wampum from New England as well as 
a bountiful supply directly from the cockle-shell 
mints operated industriously by the English on 
Long Island. In 1641, complaints were made 
that " very bad wampum is at present circulating 
here, and payment is made in nothing but rough 
unpolished stuff which is brought hither from 
other places," so that "the good, polished Wam- 

1 Hazard, II. 124. 


pum, commonly called Manhattan Wampum, is 
wholly put out of sight and exported." Then we 
hear of a plague of bad wampum " of Stone, Bone, 
Glass, Muscle-Shells, Horn, yea even of Wood and 
Broken Beads." Washington Irving had an un- 
doubted basis of fact for his humorous description 
of the trials of the Dutch with the enterprising 
Yankees, for we find wampum greatly depreciated 
in 1659, "in consequence of the great importation 
of Wampum from New England, which barters 
therewith, and carries out of the country not only 
the best cargoes sent hence, but also a large quan- 
tity of Beaver and other Peltries," so that the peo- 
ple of New Amsterdam " remain with a chestf ul 
of Wampum, which is a currency utterly valueless, 
except among New Netherland Indians only." ^ 
In spite of all such disturbances, however, this 
rude money continued to be used more or less in 
New York as late as 1701. 

As time went on, other forms of barter currency 
multiplied in the colonies. Yet Maryland and 
Virginia clung to the use of tobacco, which long 
remained the principal medium of exchange, even 
after its value had fallen from three shillings to 
twopence per pound.^ In nearly all the planta- 
tions, beaver and other kinds of peltry were util- 

^ For these references to New Netherland, see O'Callaghan, 26, 


* Scharf, I. 273, 278, 280, 282 ; II. 35-36 ; McMahon, 224-225, 
283 ; Ripley, no, in, 1 31-132 ; Hist Mag,, II. 42-43. In Vir- 
ginia the burgesses frequently insisted upon having their own 
wages paid in coin. Ripley, 132. 



ized extensively as currency, since furs, like 
tobacco, " were in demand in Europe, and could 
always, without much loss, be converted into coin 
or its equivalent." In the Carolinas, rice and tar 
were used for a similar purpose. Massachusetts, 
in 1 63 1, made corn a lawful tender for all debts, 
except in cases where beaver or money should be 
specified.^ In addition to the commodities already 
mentioned, we find that the various colonies, at 
one time or another, authorized the payment of 
public or private debts in wheat, oats, barley, peas, 
I bacon, pork, beef, fish, flax, wool, sugar, brandy, 
f whiskey, and even musket balls.^ West of the 
Alleghanies, in Tennessee and Kentucky, Mr. 
Roosevelt tells us that a similar barter currency 
was in use during the last decade of the eigh- 
teenth century; and, as late as 1885, the Bismarck 
Tribune reports that gopher tails were at that 
time employed as money in some sections of 

The use of these forms of " country pay," or 
"specie," as, singularly enough, it was sometimes 

1 For the O^olinas, see Hawks, II. 163 ; Douglass, Discourse, 
317 ; Stat, of S. C, II. 37 ; Col. Recs. N. C, IV. 920. For Mas- 
sachusetts, see Felt, 16. ''It is further ordered, that come shall 
passe for payement of all debts at the usuall rate it is solde for, 
except money or beaver be expressly named." Mass. Recs., I. 92. 

*0n these barter currencies, see Bronson, 5-13 ; Weeden, loi, 
119, 128, 142, 170, 178, 196 ; Femow, 298 ; Hist. Mag., XL 43-44 ; 
Bruce, II. 521 ; Douglass, Discourse, 315-317. 

•Roosevelt, III. 160-161 ; IV. 113-114, 232-233; Andrews, 



called, occasioned great trouble for public officials. 
Attempts were made to regulate prices in order 
to keep the currency from fluctuating so much as 
to be useless.^ In Massachusetts the collectors of 
taxes were continually involved in the most ridicu- 
lous difficulties.^ Payment of the public dues in 
the lankest cattle available became so common 
that the General Court had to enact, in 1658, that 
no man should discharge the rates with "leane 
cattle."^ Ten years later the mere* cost of 
transporting the commodities received for taxes 
amounted to ten per cent of the entire assessment, 
and a further loss of five per cent was incurred 
through shrinkage and deterioration. Accordingly, 
in 1694, the government was obliged to discon- 
tinue the payment of taxes in such a currency.* 
The experience of other colonies did not differ 
greatly from that of Massachusetts. Obviously 
enough, the employment of such cheap substitutes 
served to expedite the exportation of such gold 
or silver coins as found their way into the country, 
and to delay the accumulation of a sufficient stock 
of metallic money. The precious metals could not 

1 Wcedcn, 97, 99, 115, "8, 132. 

'Thus a Springfield constable had to transport to Boston one 
hundred and thirty busheb of peas received in payment of prov- 
ince taxes. This required eight trips to Hartford, and two from 
there to Boston. In passing the falls of the Connecticut a part 
of the cargo was spoiled by the water, and the collector had to 
petition the General Court for relief. Felt, 53. 

•Mass. Recs., IV. 348. 

* Felt, 38, 40, 45, 54 ; Douglas, Fin. Hist., 49-50« 


well compete with puny cattle and bad g^in as a 
medium for the settlement of public or private 

^In 1749, the Governor of North Carolina complained of the 
losses caused in that province by receiving commodities for taxes. 
He said that it was " a stated rule that of so many commodities 
the worst sort were only paid." Col. Recs. N. C, IV. 92a 




In spite of the initial poverty of the colonists 
and the influence of the rude barter currencies, 
the increase of industry and commerce gradually 
brought into the more prosperous of the planta- 
tions a considerable amount of specie, of which 
a portion was retained in circulation. In the 
seventeenth century this consisted chiefly of 
Spanish silver money; but in the eighteenth, 
gold coins, mainly from the Brazilian mines, 
appeared in no small numbers.^ Nevertheless 

^ The relative quantities of gold and silver that found their way 
into the colonies have not been made the subject of special investi- 
gation. But see Chalmers, 5, 8, 10, 15. In 1676 Edward Ran- 
dolph wrote from Massachusetts : " There is a reasonable quantitie 
of silver money in the colony, but no gold." See Hutchinson's 
ColL Papers, 498. In the seventeenth century gold was much 
scarcer than silver throughout the world. The world's annual gold 
product, which was only ^3,885,000 at the time of the discovery 
of America, averaged but ^5,662,000 between 1600 and 1620. 
The silver mines of South America, however, had increased 
the world's annual silver product from ^1,954,000 in 1500 to 
an average of |i 7,579,000 between 1600 and 1620 ; and Spanish 
silver money had become common in all parts of the globe. For 
these statistics see Rep. Prec. Metals, 1896, 346-347. The gold 
product increased but little during the seventeenth century. In 
1677 the Brazilian mines began to be systematically operated, and 



complaints of the scarcity of coin and the alleged 
impossibility of keeping it in circulation remained 
so common, and have been accepted so compla- 
cently by most historians, that it will be necessary 
to present a little of the evidence that proves the 
presence of a moderate amount of specie in the 

As early as 1639, Winthrop noted in his "Jour- 
nal" the arrival of a bark which brought "much 
wealth in money, plate, indico and sugar." ^ This 
trade continued until, thirteen years later, Massa- 

by 1700 were contributing largely to the world's stock of gold. As 
a result, the annual production of gold increased greaUy between 
1700 and 1760, as is shown in the following table : — 

Years. Averagb Annual Product in 

Thousands op Marks. 
Brazil. All Other Countries. 

1681-I700 4,185 25,849 

1 701-1720 7,673 28,095 

1 721-1740 24,692 28,535 

1 741-1760 40,734 27,928 

See Soetbeer, 109-110. For an account of the Portuguese gold 
coinage, based on the product of the Brazilian mines, see Del Mar, 
128-132. This enlarged output of the yellow metal furnished the 
American colonies with gold coins in the eighteenth century. The 
increase of the gold output relatively to that of silver is shown in 
the following table : — 

Ybars. Averagb Annual Product in 

Thousands op Dollars. 
Gold. Silver. 

1581-1600 4,905 17413 

1681-1700 7,154 14,210 

1 721-1740 ...... 12,681 17)924 

1 741-1760 16,356 22,162 

1 Winthrop, N. Eng., I. 307. Cf. Bradford, 441. 


chusetts established its celebrated mint in order to 
recoin its circulating medium into a uniform silver 
currency. In 1671, Ogilby wrote of Maryland, 
"yet there wants not, besides English and other 
foraign Co)ais, some of his Lordship's own 
Coyn." ^ In Virginia, Mr. Bruce finds abundant 
evidence of considerable accumulations of money 
and plate toward the close of the seventeenth cen- 
tury; and Dr. Ripley has reached the conclusion 
that a good deal of metallic money was always in 
circulation, especially in the tidewater districts.^ 
In the year 1698, Gabriel Thomas reported that 
silver was plentiful in the vicinity of Philadelphia.^ 
Two years later, John Fysack wrote concerning 
Carolina, Pennsylvania, New York, and New Eng- 
land: "There is now in the Plantations a great 
quantity of Spanish money Plate and Bullion and 
would be more if returns were answerable."* In 
1740, Dr. Douglass stated: "Before Paper-Money, 
took Place in New England, Silver abounded in 
Currency as much and perhaps more, than in 
many of our Colonies."^ Ten years later, when 
Massachusetts returned to a specie basis, its trade 
prospered as never before; and Franklin, who 
was an advocate of paper money, was obliged to 
admit that the resumption of a silver currency had 

1 Chalmers, 5. 

« Bruce, II. 504, 506, 507 ; Rjplsyi n8,ii9> 131 • 
* Gouge, 5. See also statement of William Fishboume, in 1739. 
Watson, Annals, I. 75. 
< Chalmers, 12. 
^ Douglass, Discourse, 338. 



met with popular approval.^ This is only a tithe 
of the evidence that might be presented upon this 

With the appearance of the Spanish and other . 
coins, began the process of clipping the money. 
This was practised extensively in the West Indies, 
whence the colonies on the mainland secured the 
larger part of their supply of specie; and it 
continued until the Spanish piece of eight was 
often reduced in weight by as much as one-third.* , 
The light weight coins naturally drove the " broad " 
pieces of eight out of the country, but the colo- 
nists may have condoned the practice, since the 
cheaper money was more readily retained in circu- 
lation. For it was difficult to keep even the 
clipped money in the country so long as the barter 
currencies were in vogue. A shilling in " coimtry 
pay" was always at a discount when compared 
with a shilling in silver, and this discount amounted 
to thirty or forty per cent.* A full weight dollar. 

^See his examination before Parliament in 1766. Works of 
Franklin, III. 426-427. In 1767, while opposing Parliamentary 
prohibition of paper money, Franklin had to admit the beneficial 
effects of resumption in New England. Idem^ IV. 84-85. 

* ** As the said Silver Coins went by Tale, and were not millM» 
they were clipped to such a Degree, that the Exchange to England 
varied in Proportion, . . ." Ashley, 51. See especially Douglass, 
Discourse, 301 ; Docs, of N. Y., IV. ii 33-1 135 ; Yale Rev.^ VII. 
263, 409 ; Felt, 35, 59, 60 ; Bronson, 20-22 ; Femow, 303-305. 

'In 1704, a traveller reports that the price of a knife was \2d. 
in '' country pay " and dd, in coin. Mr. Bronson finds that the 
barter currency was always at fifty per cent discount in G>nnecticut. 
Bronson, 22-23. Cf. Yale Rev.^ VII. 248, 259. 



of 17I dwts. would not remain in circulation by 
the side of a barter shilling; and it could be 
clipped down to 12 dwts., or even less, before it 
would cease to be dearer than "country pay." 
Thus the practice of clipping coins became practi- 
cally universal in spite of stringent laws that were 
designed to prevent it.^ 

Since the colonies, until the Revolution, retained 
the English denominations of pounds, shillings, 
and pence for their money of account, it became 
necessary to establish rates at which the Spanish 
and other foreign coins should be received. In the 
seventeenth and eighteenth centuries, the silver 
pound sterling was the standard, or "rating," 
money of England. This equalled, from 1600 to 
1 8 16, 1 718.7 grains of fine silver; so that the 
shilling contained 85.93 grains of pure metal.* In 
the seventeenth century, the Spanish dollar, or 
piece of eight, has been variously estimated at 385 
to 388.5 grains of fine silver, a weight which would 
have made it equivalent to about 4s. 6d, in English 
money .^ In 1704, Newton's assay at the English 
mint gave the coin an official rating of 386.8 grains 
of pure metal, and fixed its value at 4^. 6d,, a 
valuation which it retained during the next eighty 

^ Bronson, 21 ; Fernow, 303 ; YaU Rev., VII. 264. In South 
Carolina the penalty for clipping was at one time death without 
benefit of clergy. Stat, of S. C, II. 72-73. 

^McCulloch, 318-319 ; Ruding, I. 12, 357. 

• This subject has been treated exhaustively by Professor Sumner 
in Amer. Hist. Rev.^ III. 607-619. Cf. Chalmers, 390-394, 402-403 ; 
Del Mar, 105-111. 

C 17 


years, although its fine contents gradually dimin- 
ished.^ This customary rating of the dollar made 
the pound sterling worth $4.444 ; and, so long as 
the colonies valued the coin at 4s. 6d,^ the colonial 
pound remained the same as the pound sterling. 

But as early as 1642, Massachusetts raised the 
rating of the dollar to 5^., and Connecticut took 
similar action the following year.* In 1645, Vir- 
ginia rated this coin at 6j., but this valuation waa 
lowered to S^. a decade later.^ Thus began the 
depreciation of the colonial metallic currencies. 
In 1652, Massachusetts established a mint, and 
began to coin shillings that were 22J per cent 
lighter than the sterling standard.* Upon this 
basis, the dollar would have been worth a little 
less than 6s, Between 1671 and 1697, no fewer 
than nine colonies began to advance the piece of 
eight,^ and by 1700 great diversities existed in the 
ratings given to this coin in different localities. 

1 Chalmers, 414 ; Amer. Hist. Rev,, III. 613-615. 

* Mass. Recs., II. 29; YaU Rev.^ VII. 247-248; Conn. Recs., 1. 86. 

« Hening, Stat., I. 308, 397 ; Ripley, 112, 114. 

*0n the New England mint, see Felt, 30-35 ; Hutchinson, 
Hist, I. 164-165 ; Watson, 2-6; YaU Rev,, VTI. 249 et seq,; 
Hickcox, Coinage, 1-13 ; Crosby. The New England shilling had 
fine contents of 66.6 grains. YaU Rev,, VII. 252. 

^In 1 67 1, Maryland rated the dollar at 6j. Arch, of Md., II. 
286. In Mass. and N. Y., pieces of eight that were of full weight 
were, in 1672, advanced to 6j. Mass. Recs., IV. Part II. 533 ; 
Fernow, 300. For other instances referred to, see Papers of N. H., 
I. 448, 480 ; Belknap, I. 20i ; YaU Rev,, VII. 261, 263 ; Bronson, 
20; Leam. and Spicer, 285, 295, 517; Min. of Penn., I. 558; 
Scharf, II. 35; Bruce, II. 507-511 ; Ripley, 115-119; Stat of 
S. C, II. 72, 94, 163, 165. 



Virginia, after having advanced the dollar to 6s. 
in 1683, allowed it to pass at 5^. a few years later. 
South Carolina fixed a rate of S^. for a light coin 
weighing 12 dwts., with an addition of s^d. in 
value for every additional pennyweight. In New 
York, a dollar weighing 15 dwts. passed at dr., 
while one weighing 17 dwts. was rated at 6s. gd. 
Pennsylvania, and possibly West Jersey, gave the 
piece of eight the highest rating, valuing it at ys. 
6d. for a coin of 17 dwts. gross contents. In the 
other colonies 6s. had become the prevailing valua- 
tion of the dollar.^ By this time the evils of these 
diverse and fluctuating currencies had become so 
great as to call forth complaints to the English 
authorities, who had already directed colonial gov- 
ernors to refuse assent to laws that tampered with 
the currency.* Accordingly a royal proclamation 

1 For Virginia, see Ripley, Ii6~ii8; Bruce, II. 510-511. For 
South Carolina, Stat, of S. C, II. 178; Carroll, II. 258. The 
rating of 5^. for a dollar weighing 12 dwts. would give a rate of dr. 
5^ for a dollar weighing 17 dwts., allowing 3|^. for each addi- 
tional dwt Cf. Stat, of S. C, IX. 779. For New York, Femow, 
301. For Pennsylvania, Shepherd, 402-404 ; Docs, of N. Y., IV. 
1047, '059» I* 34* Fo'f West Jersey, a law of 1693 rated a 17 dwt. 
coin at 7^. This was done in order that the coins might have the 
same rating that prevailed in Pennsylvania. See Learn, and Spicer, 
517. It seems possible that the actual usage in West Jersey may 
have followed that of Pennsylvania in 1700. In Maryland there is 
a contemporary statement that the dollar was rated at 41. (id, in 
1697. ^c Ripley, 115; Bruce, II. 511. This seems to be an 
error, since it conflicts with the acts passed by Maryland in 1686 
and 1708, rating the dollar at 6j. See Scharf, II. 35. 

'Chalmers, 10-15; Bruce, II. 509-510; Docs, of N. Y., IV, 
1047, 1059 > Femow, 301 ; Ripley, 116 ; Smith, N. J., 240. 



was issued in 1704, and an express act of Par- 
liament was passed in 1707, requiring that the 
Spanish piece of eight should not be rated at more 
than 6s,, and other coins at more than correspond- 
ing values.^ But this law was almost universally 
evaded. The West Indian colonies, noting that 
the act specified only silver coins, proceeded "to 
give independent ratings (by weight) to the gold 
coins of Spain," and thus adopted a gold stand- 
ard of value which could be depreciated at will 
without any violation of law.^ Upon the mainland 
the colonies before long began to rate silver by the 
ounce, and thus the depreciation continued. In 
accordance with the rating of 6s. fixed by Parlia- 
ment for the dollar, an ounce of silver should have 
been valued at 6s, 10.65^.* But the colonies usu- 
ally * began to rate silver at 7^. or 8j. per ounce, 
and soon placed it at even higher figures.^ Thus 

1 Chalmers, 14-16, 414-415 ; YaU Rev,, VII. 406-410 ; Doug- 
lass, Discourse, 301-302; Ashley, 50-63. * Chalmers, 15. 

• See Sumner, in Yale Rev,, VII. 407. The sterling value of 
silver was 55. zd, per ounce. The law of 1707 allowed a rating one 
third higher than this. Cf. Chalmers, 14. 

^ Maryland passed a law in 1708 in compliance with the act of 
Parliament. Scharf, II. 35. Until 1733, when the colony issued 
paper money, this valuation was retained. Douglass, Discourse, 315. 
Virginia in 1710 rated the ounce of silver at 6f. yi,^ which was 
even less than Parliament had allowed. Ripley, 127. But in 1727 
silver was raised to 6x. %d. Idem, 130. See Douglass, Discourse, 316. 
Here it continued, and was, therefore, always a little below the 
rate fixed by Parliament. 

« Belknap, III. 225; Yale Rev,, VII. 407-412; Felt, 60; 
Weeden, 387 ; Conn. Recs., V. 157 ; Phillips, I. 19, 61, 106, ill ; 
Fernow, 306 ; Douglass, Discourse, 311, 312. 



it became necessary for all people that handled 
any considerable quantity of money to have scales 
for ascertaining the weight of the coins. Finally, 
it is to be remembered that, during the first half of 
the eighteenth century, most of the colonies issued 
a paper currency whose depreciation soon brought 
them down to a paper money basis; so that the 
valuations which the English authorities gave to 
specie were a matter of small moment. 

In 1750, when Massachusetts retired her paper 
currency and resumed a specie basis, Spanish 
dollars weighing 17 dwts. were rated at 6^., and 
silver was rated at 6s. 8d. per ounce.^ This was 
a return to the rates fixed in the Parliamentary 
enactment of 1707. A somewhat similar process 
went on in other colonies that redeemed or re- 
pudiated their redundant paper currencies, but the 
rates finally given to the dollar were not uniform. 
New Hampshire, Rhode Island, Connecticut, and 
Virginia rated the dollar at 6s.^ South Carolina 
and Georgia adopted valuations of 4s. Sd, and 5^. 

1 YaU Rev,^ VII. 412-413 ; Felt, 1 21, 127 ; Weeden, 674-676 ; 
Acts of Mass., III. 430, 480, 494. These rates for the dollar and 
the ounce of silver are not equivalents, since, with the dollar at 6^., 
an ounce of silver would have been worth about 6;. 10.65^. But, as 
a matter of fact, few, if any, dollars were of full weight, i,e* I7jdwts. 
gross contents. With silver at 65. %d. per ounce, the dollar should 
have had fine contents of about 377.4 grains, and this corresponds 
well with what information we have concerning the contents of the 
dollar. On this basis, the shilling would contain 62.9 grains of fine 

* Papers of N. H., IX. 66 ; Potter and Rider, 99 ; Bronson, 74 ; 
Ripley, 13^-133 ; Writings of Jefferson, VII. 409. 



respectively.^ In Pennsylvania, New Jersey, Del- 
aware, and Maryland, the dollar passed for js, 
6d? Finally New York and North Carolina 
settled upon a rating of 8^.^ These valuations 
were retained until the state currencies were super- 
seded by a national system after 1789. Thd 
resulting confusion that attended interstate deal- 
ings can easily be imagined. 

The result of this process was a gradual and 
progressive depreciation of the colonial currencies^ 
as compared with the sterling standard.* When 
the Spanish dollar, which was worth 4s, 6d.y was 
rated at Si'., the colonial pound was reduced td 
$4.00, or 1547 grains of fine silver, and ;£iii of 
colonial money equalled ;£ioo sterling. With the 
dollar advanced to 6s,, the colonial pound fell to 
ii'iii or 1289 grains of pure metal, while £iZi\ 
of colonial currency equalled ;£ioo sterling. A 
rating of 7s, 6d, for the piece of eight reduced the 
colonial pound to $2.66, or 103 1 grains of silver; 

J Stat, of S. C, IV. 543 ; Dip. Corr. of Rev., XII. 91. In South 
Carolina until 1783 the dollar was rated at 32J. 6//., a valuation that 
was fixed by the depreciation of the paper money. Ramsay, II. 164. 

2 Phillips, I. 26-27; Acts of N. J., 7; Laws of Md., 1 781, 
Chap. 16 ; Laws of Del., II. 731-732 ; Dip. Corr. of Rev., XII. 91 . 

•In 1738, silver was current in New York at 91. ^(L per ounce. 
Douglass, Discourse, 312. Two years later it fell to about 9^. Docs, 
of N. Y., VI. 169. In 1756, Smith wrote that since the last war 
silver had been valued at about 9;. 2d, Smith, N. Y., 333. This 
last rating of silver would make the dollar worth 8j., and it remained 
thenceforth at that figure. See Hickcox, Bills of Credit, 50. For 
North Carolina see Williamson, II. 1 15 ; Dip. Corr. of Rev., XII. 91. 

^ On this general subject, see Adler, 


and made ;£i66f of colonial currency equal to 
;£ioo sterling. Finally, when the dollar was 
valued at 8j., the colonial pound amounted to 
$2.50, or 967 grains of fine metal; while £177^ 
of colonial money was equivalent to ;£ic)0 ster- 

The chief reason for the progressive deprecia- 
tion of the colonial coin currencies was the fact 
that the colonists believed that specie could be | 
more easily retained within their borders, or at- 
tracted from neighboring plantations, by raising! 
the rates at which it should be received. Before 
1635 Rice Vaughn wrote: " If we do observe those 
States which do soonest and most raise their Money, 
we shall find that they do most abound with Money ; 
and that Trades and Manufactures do most flour- 
ish there." ^ This expedient of raising the value 
of money, so often employed in Europe, was likely 
to be favored in a new country, where the poverty 
of the settlers made it difficult to accumulate a 
large stock of specie. Moreover, since it lightened 
the burden of debts whenever past obligations 
were not specifically excepted from . its opera- 
tion, it is easy to see why such a measure should 
have found support from certain classes of people 
in the colonies. Many of the acts for raising the 
value of the coins state that the purpose is the 

^See note by editor, in Douglass, Discourse, 300-301. All of 
these comparisons may be found carefully tabulated in Wright. See 
also Adler. 

^Chalmers, 5, 7. 



" Encouragment of those that shall bring monys 
into this Province," or some similar object.^ The 
royal proclamation of 1704 alleges "the indirect 
Practice of Drawing the Money from one Planta- 
tion to another," as a cause for the imperial regu- 
lation of the colonial currencies ; and Franklin, in 
1767, assigns a similar motive for the policy of 
overvaluing specie.* Of course, in the long run, an 
increase of prices rendered nugatory all attempts 
to increase the volume of money in this manner.* 
Equally futile were the numerous prohibitions 
placed upon the exportation of gold and silver,* 
which, of course, had the same general purpose in 

If more materials were available, it would be 
interesting to examine at length the attempts of 
the several colonies to regulate the rates at which 
gold and silver coins should circulate concurrently. 

1 Arch, of Md., II. 286; Stat, of S. C, II. 163, 1 78; Hening, Stat., 
1.308; Papers of N.H., 1. 448; Mass. Recs.,V. 351 ; Felt, 36; Shep- 
herd, 402. See also two interesting petitions asking that coins should 
be raised, in Cal. Va. Papers, I. 53-54 ; Docs, of N. Y., IV. 1 134. 

^Chahners, 414; Works of Franklin, IV. 81-82. In North 
Carolina and New York, the increase in the rating of the dollar to 
Ss, has been attributed to the influence of the paper currencies. 
See Williamson, II. 115; Smith, N. Y., 332-333. 

• Franklin, in the passage just referred to, well states the result 
of this " weak practice," as he termed it : ** The balance of trade 
carried out the gold and silver as fast as it was brought in, the mer- 
chants raising the price of their goods in proportion to the increased 
denomination of the money." 

*See Felt, 16, 35, 36; Bronson, 17-18; Weeden, 382; Ya^ 
Rev,, VII. 257, 264; Femow, 305; McMahon, 226; Bruce, II. 



As it is, we may find it worth while to consider the 
subject briefly. It has been shown that gold coins 
came into the colonies in much larger numbers 
after 1700 than had formerly been the case. In 
Pennsylvania, between 1700 and 1739, there were 
at least seven changes in the rates at which gold 
and silver were receivable, and the ratio varied from 
14.70: 1 up to 16 : i.^ In South Carolina a statute 
enacted in 1695 practically established a ratio of 
13:1; while six years later a ratio 15:1 prevailed.^ 
Virginia established a ratio of 16 : i in the year 
1 714, but this was changed to 15:1 thirteen years 
later. In 1782 a ratio of 16: i was reestablished.^ 
In 1736 Massachusetts issued bills of credit of a 
"new tenor" which were declared to be " equal in 
value " to certain weights of gold and silver, from 
which a ratio of 14.84 : i may be computed.* Thir- 

* Phillips, I. 19, 27. In 1709, the ratio adopted was so favorable 
to gold that Philadelphia merchants stated that ''our pa3rments 
were mostly made in gold, New York and Britain gradually exhaust- 
ing our silver." Proud, II. 161. The ascertainment of the exact 
ratios established by colonial statutes is commonly a work of some 
difficulty, because the colonists, in some cases at least, *' disregarded 
the difference in fineness of the metals, and derived the ratio from 
the gross weights." See YaU Rev., VII. 413. In most cases the 
computations here presented are necessarily based upon a compari- 
son of the gross weights. In some cases, however, where Professor 
Sumner's computations are used, the ratios are based upon a com- 
parison of the fine contents of the coins. 

« Stat, of S. C, II. 195, 178; Carroll, II. 258. 

•Hening, Stat, IV. 51, 52, 218, 219, XL 117, 118; Ripley, 127, 

^ YaU Rev,, Vll. ^11. 



teen years later, the acts providing for resumption 
of a specie basis rated gold and silver coins in such 
a manner that it is difficult to compute the ratio.^ 
But in 1752 treasury bonds were made payable in 
silver or gold at a ratio of 15.38 : i.^ Gold was not 
legal tender at this time, although it was current 
in the province at about the rates specified in a 
statute of 1750.* In 1758 a large amount of gold 
was received from England in payment of subsi- 
dies voted by Parliament, so that the legislature 
could declare four years later that "gold is now 
become by far the greatest part of the medium of 
trade in this province." Meanwhile the relative 
value of silver in Europe had risen so that an ounce 
of gold, which in 1756 was equivalent to 14.94 
ounces of silver, would exchange for only 14.14 
ounces of the white metal in 1760. Under such 
conditions, foreign obligations naturally were met 
by shipping silver out of the province.* In 1762 an 
act was passed making gold legal tender at a rate 
of about 4.22 grains for a shilling. Since the sil- 
ver coins in actual circulation passed at 62.9 grains 

1 YaU Rev,^ VII. 413-414. Taking the value of a shilling in 
the gold coins that received the most favorable rating, and the 
value of a shilling of the silver currency then in circulation, we 
obtain a ratio of 14.94: i. 

* YcUe Rev,^ VII. 414. Taking the fine contents of the silver 
coins in actual circulation, Professor Sumner computes a ratio of 
14.52: I. 

"One writer claimed that the act of 1750 made gold a legal ten- 
der. Yale-Rev,^ VII. 414. But Hutchinson entertained the oppo- 
site opinion. Hutchinson, Hist., III. 98. 

*Soetbeer, 129; Hutchinson, Hist., III. 99. 


for a shilling, this law established a ratio of 14.905.^ 
This ratio would probably have overvalued gold 
sufficiently to enable it to drive silver out of the 
province if silver had remained at the value which 
it held in 1760. But, as it proved, the white metal 
fell in value so that in 1762 it required 15.27 ounces 
to purchase one ounce of gold; while, for the 
next few years, the ratio between gold and sil- 
ver remained at about 14.8: i. As a result, the 
act of 1762 did not drain the province of its 
specie ; although its immediate effect was, as the 
legislature probably intended, to depreciate the 
standard of value about 4f per cent^ Finally 
it may be noted that the ratings of gold and silver 
adopted in Massachusetts in 1750 seem to have 
been followed fairly closely in New Hampshire, 
Rhode Island, and Connecticut ; so that a ratio of 
slightly less than 15:1 may be said to have pre- 
vailed in New England.* This undervalued silver, 
which in every year from 1740 to 1790, with only 
five exceptions, was worth more than one-fifteenth 
as much as gold.^ Yet the divergence of the legal 
from the market ratio was not great enough to 
drain these colonies of their silver coins, although 
silver was probably the metal more commonly 

1 Acts of Mass., IV. 515, 516; Yale Rev., VII. 417. 

« YaU Rev,, VII. 418. 

•Acts of Mass., III. 495 ; Papers of N. H., VII. 77-78, 282, 
296 ; G>nn. Recs., X. 339 ; Potter and Rider, 99. All of these 
acts rate silver at 6j. &/. per ounce, and gold at about ;f 5 per 

*Soetbeer, 129. 



employed in the payment of foreign debts.^ Per- 
haps the coins in actual circulation were clipped 
to such an extent that the lighter silver pieces 
would stay in circulation longer than the heavier 
gold pieces, in spite of the overvaluation of the 
yellow metal. 

^ In Canada during the eighteenth century silver was overvalued, 
and the problem of currency legislation was to keep gold in circu- 
lation. In the West Indies, on the other hand, gold was over- 
valued, and even the fractional silver coins tended to disappear 
from circulation. See Chalmers, 20-21. 




Soon after the colonies commenced to advance 
the ratings of their current coins, there began a 
series of attempts to establish private banks. It 
must be remembered that, during the entire colo- 
nial period, the word "bank" meant simply a 
batch of- paper money, a conception that has dis- 
appeared only gradually during the present cen- 
tury as the functipns of deposit and discount have 
assumed greater importance in modern banking. 
During the seventeenth century, more especially 
during its closing decades, public and private 
credit had been developed in the countries of 
northern Europe upon a scale that was previously 
unknown. Naturally enough the real nature and 
precise limitations of the great agency thus created 
were not clearly understood. It was perceived that 
credit increased enormously the control over capi- 
tal enjoyed by a person or a company ; but it was 
not realized so readily that credit is not the same 
as capital, and that capital cannot be directly 
created by credit, although its efficiency may be 
greatly increased. John Law's projects, the Mis- 
sissippi Scheme in France, the English Land 
Bank Scheme, and the South Sea Bubble were 



no isolated phenomena: many other fallacious 
enterprises grew out of the misunderstandings 
'that prevailed concerning the nature and proper 
uses of credit. Theories and plans of a paper cur- 
rency began to appear in England as early as 
1650, when William Potter published "The Key 
of Wealth, or A new way for Improving of 
Trade." Other schemes followed, all of which 
proposed to find some other medium than metallic 
money for a basis of paper credit For this pur- 
pose deposits of merchandise or pledges of land 
were commonly suggested.^ In England the exist- 
ence of more settled industrial conditions and the 
possession of a larger supply of capital facilitated 
the growth of sounder views concerning the true 
nature and proper basis of credit, but these lessons 
were not learned until much sad experience had 
been gained from unsafe banking ventures ; while, 
as late as the period of restriction from 1797 to 
1 8 19, all the forces of unreason had to be most 
vigorously combated before it was generally 
admitted that the premium on bullion was due 
to the depreciation of the paper currency, and 
not to an alleged scarcity of gold.^ In the Ameri- 
can colonies, however, the economic conditions 
were precisely the reverse of those which prevailed 
in the mother country; and all circumstances 
favored the persistence of erroneous ideas. 

lOn these banking schemes in England, see Rogers, 1-88; 
Dunbar, in Q.J, i?., II. 482-490 ; Trumbull, 6-7. 
2 Macleod, II. 30-50. , 



At some time previous to 1652, "paper bills" ( 
seem to have circulated in some parts of Massa- 
chusetts, and there is a record of projects "for 
raiseing a Banke/' ^ William Potters's " Key of 
Wealth," or some similar publication, may have 
come to the attention.of Governor John Winthrop, 
of Connecticut; for, in 1661, he is found to be j 
entertaining " some proposalls concerning a way of 
trade and banke w%ut money." ^ A few years [ 
later, the Rev. John Woodbridge submitted a proj- 1 
ect " for erecting a Fund of Land, T)y Authority, ■ 
or private Persons, in the Nature of a Money-Bank '^ 
or Merchandise-Lumber,'*^ In 1671, 1681, and 
1686, private banks were actually established in 
Massachusetts; and bills were issued, probably 
upon the security of " such Real Estates of Lands, 
as also personal Estates of goods and Merchan- 
dizes not subject to perishing or decay." * These 
projects, however, proved to be short lived. In 
them can be distinctly traced the influence of 
theories that were then prevalent in England. ^ 
In 1690, Massachusetts, followed shortly by other 
colonies, emitted its first public bills of credit. 

iFelt, 33 ; Proc. Ant. Soc., 1866, 35-36 ; Weeden, 318. 

* Trumbull, 8-9 ; Weeden, 318-324., 

•Trumbull, 4-7, 9-1 1 ; Weeden, 328-329 j Douglas, Fin. Hist. 


*Proc. Ant Soc, 1866, 38-39; Felt, 46-47; Douglas, Fin. 
Hist, 45-47 ; Trumbull, 11-14 ; Q,/, E,^ XI. 70-75. 

•This is shown by Trumbull, 6-9. It is interesting to note that, 
in the middle colonies, Thomas Budd in 1685 projected a bank of 
commodities. Budd, Good Order, 40-41. 



Such issues soon became so common as to divert 
attention, in a great measure, from private bank- 
ing enterprises. Yet in 1700, 1714, 1733, 1739, 
and 1740, private banks were projected in Massa- 
chusetts, and were finally suppressed with great 
difficulty.^ In some cases, however, these associa- 
tions actually placed a considerable quantity of 
their Bills in circulation. The great Land Bank 
of 1740 issued about ;^35,cxx) of notes, and made 
a most vigorous struggle to maintain its existence.* 
In New Hampshire, Connecticut, and South Caro- 
lina, associations were formed, between 1732 and 
1738, for the purpose of engaging in similar ven- 
tures; and at a later date we hear of other 
attempts in Pennsylvania and Virginia.* But 
Parliament interfered, in 1741,* by extending to 
the colonies the provisions of the " Bubble Act," 
which had been passed twenty-one years earlier in 
order to suppress such swindles as had occurred 
during the time of the South Sea Company. 

The paper money that so long cursed the Ameri- 
can colonies was issued by acts of the several legis- 

iFelt, 55, 65-67, 88-89, 97; Hutchinson, Hist., II. 188-189, 
341 ; Sumner, Banking, 6-9 ; Q./. E., XI. 75-91, 136-143. 

2 Hutchinson, Hist., II. 352-355 ; Felt, 97-109 ; Douglas, 
Fin. Hist., 127-129 ; Sumner, Banking, 9-1 1 ; Weeden, 486-491 ; 
Q,/, E,y XI. 148-157 ; Proc. Ant. Soc, April, 1896. . 

« Papers of N. H., IV. 685 ; Felt, 91-92 ; Bronson, 42-43 ; 
Q, /. E,^ XIII. 71-84 ; Douglass, Discourse, 310, 317 ; Shepherd, 
433 ; Phillips, I. 27-28, 199 ; Sumner, Banking, 8, 9, 11. 

^ Stat, at Large, 6 Geo. I. c. 18, 14 Geo. II. c. 37. Cf. Sumner, 
Banking, 10. 



latiires. Massachusetts had led the way, in 1690, 
with an issue of bills that were used to defray the 
expenses of a disastrous military expedition.^ Her 
example proved contagious; and, by 171 2, New 
Hampshire, Rhode Island, Connecticut, New York, 
New Jersey, North Carolina, and South Carolina 
had issued quantities of bills of credit in order to 
meet the outlays occasioned by Queen Anne's 
War.^ In subsequent years bills were emitted as 
a regular means of defraying the current expenses 
of government; and, as the volume of paper ac- 
cumulated, a great depreciation ensued. Sooner 
or later all the plantations were deeply involved in 
the mazes of a fluctuating currency, for the bur- 
dens attending the various wars of the eighteenth 
century were so great as to induce even the most 
conservative colonies to resort to this easy method 
of meeting public obligations.^ Virginia suc- 

1 Hutchinson, I. 356-357 J Felt, 49-52 ; Weeden, 330, 379-381 ; 
Proc. Ant. Soc, Oct., 1898. 

2 South Carolina (1703); Stat, of S. C, II. 210, IX. Appendix. 
New Jersey, New York, New Hampshire, and Connecticut (1709) ; 
Phillips, I. 59 ; Hickcox, Bills of Credit, 13 ; Femow, 313 ; 
Papers of N. H., III. 410-41 1 ; Bronson, 30-31. Rhode Island 
first issued paper in 1710, and North Carolina in 1712 ; Potter and 
Rider, 7-10; Arnold, II. 39-41 ; Col. Recs. of N. C, II. p. IV., 
IV. 576. On all these colonies, see Douglass, Discourse, 302- 


« Papers of N. H., V. 722, 740-742, 812-813; VI. 506-507; 
Hutchinson, Hist, II. 390-391; Douglas, Fin. Hist, 118-119; 
Potter and Rider, 100 ; Bronson, 63-64 ; Hickcox, Bills of Credit, 
36, 39» 42 ; Fernow, 324-333 ; Phillips, I. 22-25, 73-76 ; Shep- 
herd, 427-432 ; Scharf, II. 37 ; Iredell, Laws, 115, 157, 192, 198 ; 

^ 33 


cumbed last, in i/SS, but made large issues in the 
ensuing years.^ 

A second excuse for issuing bills of credit was 
found at an early date. In 171 2, South Carolina 
created a public loan bank, and issued bills that 
were loaned to its citizens at interest, upon real or 
personal security.^ This expedient was followed 
sooner or later by nearly all of the other colonies.* 
Rhode Island easily distanced all competitors in 
the readiness and facility with which she created 
loan banks ; while Pennsylvania, New Jersey, and 

Col. Recs. of N. C, VI. 1308-1309 ; Stat, of S. C, IV. 114. Dr. 
Douglass called paper money " a great promoter of expeditions.^ 
Douglass, Summary, I. 310. 

1 Ripley, 154-157 ; Phillips, I. 194-196. Georgia issued her 
first bills in the same year. Stevens, I. 399. 

2 Stat, of S. C, II. 389, III. 232 ; Ramsay, II. 162-163. Massa- 
chusetts issued money on loan in 1714, Rhode Island in 1715, and 
New Hampshire in 171 7. Felt, 67, 77, S4 ; Hutchinson, II. 189 ; 
Potter and Rider, 1 1 ; Arnold, Index, "Banks" ; Papers of N. H., 
V. 620, 684-688. Pennsylvania and New Jersey created loan banks 
in 1723. Phillips, 1. 13, 63 ; Annals, VIII. 50-126 ; Mulford, 327. 
Delaware issued bills upon loan at about the same time. Laws of 
Del., I. 97. North Carolina adopted this expedient in 1729, Con- 
necticut and Maryland in 1733, New York in 1737, and Georgia in 
1755. Col. Recs. of N. C, IV. 419, 476 ; Bronson, 44 ; Scharf, I. 
280; Hickcox, Bills of Credit, 25 ; Stevens, I. 399. Virginia was 
the only colony that did not resort to this method of issuing bills. 
Even there, only the governor's veto prevented such action in 1755. 
See Phillips, I. 195. Pennsylvania, Maryland, and Georgia issued 
their first paper money in this form. In 1739, Douglass wrote that 
Delaware had issued paper "upon the same footing as Pennsyl- 
vania." Douglass, Discourse, 315. Land and plate were the 
favorite forms of security upon which these public loan banks were 
issued. On the loan banks in general note Douglass, Sunmiary, 11, 
99» 3651 Discourse, 302-317. 



Delaware followed a more conservative course than 
most of the other plantations. 

The abuses attending both forms of paper cur- 
rency were usually of the most flagrant sort. Bills 
were issued for the payment of current expenses 
or extraordinary outlays, and taxes would be voted 
for the purpose of redemption. Then subsequent 
assemblies would extend the period during which 
the paper money should be current, or would neg- 
lect to levy sufficient taxes for its withdrawal.^ 
Thus the currency tended always to accumulate, 
and its depreciation increased. Sometimes a legis- 

1 Papers of N. H., III. 564-565, IV. 72 ; Potter and Rider, 19 ; 
Femow, 317, 320, 327, 330 ; Shepherd, 423, 430 ; Phillips, I. 20, 
61 ; Stat, of S. C, IX. 767, 769, 773. By the year 1731, South 
Carolina had piled up a debt of ;f 106,000 that represented bills 
issued many years previously. These were then exchanged for new 
bills, and continued in circulation without any provision for their 
redemption. Stat of S. C, IX. 778-779. Subsequent statutes, 
of which the last was passed in 1769, provided for the continued 
circulation of these bills. Douglass had good reason for remarking 
that South Carolina had been "notoriously guilty of breach of 
public faith." Discourse, 317. He could with propriety say: "By 
this unnatural Contrivance they oblige Posterity to supply the 
Extravagances of their Parents and Ancestors, instead of the 
common and natural Instinct of Parents providing for their chil- 
dren." He said that piling up a debt in this manner was " really 
analogous to the Negroes in Guinea, who sell their Progeny into 
Slavery, for the sake of raising some ready Pence." Discourse, 
338, 343. Thomas Paine called attention to the manner in which 
one assembly would incur debts that were bequeathed to subse- 
quent assemblies, and said : "The amount, therefore, of paper 
money is this, that it is the illegitimate offspring of assemblies, and 
when their year expires, they leave a vagrant on the hands of the 
public." Paine, II. i8i. "^ " 

35 sy^ '^ 



lature would resolve that the bills in circulation 
should not exceed a certain sum, but such a decla- 
ration would prove utterly worthless.^ In almost 
every colony the first issues were to remain current 
for a short time only, and were to be redeemed 
speedily by taxes ; but the periods were gradually 
lengthened to twelve, sixteen, or twenty-five years.^ 
Laws were often passed providing for the emission 
of new bills to replace worn or mutilated issues. 
Then the new money would frequently be placed 
in circulation without withdrawing and cancelling 
the old,^ while bills that had been withdrawn for 
the original purpose of destroying them would 
often be reissued for current expenses.* In some 
colonies it happened that paper issued upon loan 
would not be repaid at the stated periods, and 
interest payments were commonly in arrears. 
When this occurred, the legislature would fre- 
quently extend the time of the loans, and some- 
times a large part of both principal and interest 

^Thus when Massachusetts issued her first bills, it was resolved 
that the issues should not exceed ;f 40,000. Felt, 51. But when 
the issues of legal tender notes ceased in 1748, the sum of 
;^2,466,ooo was outstanding. Douglass, Summary, I. 528. In 
1749, the amount was ;^2, 200,000. Hutchinson, II, 392. 

*Felt, 63; Douglas, Fin. Hist., 117; Bronson, 37; Fernow, 
315 ; Annals, VIII. 72 ; Ripley, 154, 156. 

•Bronson, 35-37 ; Stat, of S. C, II. 256, IX. 767, 772, 773. 

* Bronson, 51, 59, 71 ; Annals, VIII. 57, 58; Douglass, Dis- 
course, 312. In New York it was found in 1748 that the treasurer, 
instead of destroying bills that were supposed to be cancelled, 
reissued them " for his own benefit or for the benefit of his friends." 
Docs, of N. Y., VI. 534 ; Fernow, 326. 



would never be repaid.^ In this respect Rhode 
Island was probably the worst offender. Her loan 
banks were placed in the hands of a few favored 
persons, called " sharers/' who happened to 
possess the requisite "pull." The "sharers" 
then proceeded to lend out the money at a rate 
of interest that was, for the first ten years, five 
per cent higher than that which they were obliged 
to pay to the colony. In some cases the fortunate 
" sharers " would sell their privileges for premiums 
that sometimes amounted to as much as thirty-five 
per cent. The results of such performances can 
readily be imagined. 

Although the colonial bills of credit were not 
always made a legal tender, they were usually 
given a forced circulation. Most of the advocates 
of paper money would have agreed with the New 
York legislature that bills not legal tender were 
useless.^ The direst penalties — fines, imprison- 

1 Many colonies experienced difficulty in collecting interest and 
principal Felt, 70 ; Bronson, 59 ; Shepherd, 419 ; Iredell, Laws, 
1 1 7-1 18 ; Docs, of N. Y., VII. 204. In Rhode Island interest was 
often defaulted. Potter and Rider, 16, 34, 35. Once, when a loan 
became due, it was extended for ten years without interest. Identf 
19. In 1 741, in only six towns, 539 lawsuits were begun for the 
collection of loans. Idem, 56. In 1759, when the affairs of the 
loan office were settled up, ;f 50,269 was found to be unpaid and 
uncollectable. Idem, 96. This was nearly eleven per cent of the 
principal of the nine loan banks that had been issued. Ideniy 135- 
138. For an account of the speculation in "sharers'" privileges 
see Douglass, Discourse, 308-309. 

* Femow, 329. When Connecticut bills were made legal tender 
only at their current value in specie, the debtor party secured the 
repeal of the law in three years. Bronson, 63. 



ment, and confiscation — were imposed upon those 
evil-disposed persons who should dare to discrimi- 
nate in favor of specie; but such forcing laws 
were as ineffectual in supporting the credit of the 
paper money as they have proved in all other 
cases.^ When older issues had depreciated hope- 
lessly, " bills of a new tenor ** were often emitted ; 
and these were sometimes followed by others of a 
newer tenor. Thus it happened that issues of the 
"old tenor," "middle tenor," and "new tenor*' 
circulated concurrently at different rates of depre- 
ciation, the legislature usually undertaking to fix 
the relative values of the three classes of cur- 
rency.^ In order to prevent depreciation some 
of the issues bore interest, but this was a pro- 
vision that was readily repealed by subsequent 

As has always been the case, the appetite for 
paper money increased with the issues of bills of 
credit. Complaints of the scarcity of money almost 
invariably followed each emission, and one pre- 
text after another was found for issuing larger 

^ The influence of the tender laws of Virginia is well described 
by Bumaby, 31-32. 

* Felt, 92, 107 ; Bronson, 56, 59, 63, 65 ; Papers of N. H., V. 
143, 145, 621, 623 ; Potter and Rider, 53-56. In Massachusetts, 
one shilling of the new tenor was declared equal to three of the 
old tenor. In Rhode Island the proportion was one to four. 
Douglass mentions " old tenor, middle tenor, new tenor first, new 
tenor second." Douglass, Summary, I. 493. 

•Felt, 57, 75; Hickcox, Bills of Credit, 14; Ripley, 156; 
SUt of S. C, II. 712, 713, IX. 766 ; Douglass, Summary, II. 254. 


quantities of paper.^ Trade was said to be decay- 
ing, public buildings had to be constructed, forti- 
fications were needed, and dozens of other things 
must be done by setting the printing presses at 
work. The experience of the colonies demon- \ 
strates conclusively the impossibility of satisfying | 
the desire for "more money " by issuing a paper ' 
currency. Depreciation commenced at an early 
date, and tended to increase as time went on. In 
New England sterling exchange was 133 in 1702, 
a rate corresponding exactly to the rating of the 
dollar at 6s, In 171 3, it rose to 150, and had 
reached 550 by the year 1740. The climax was 
reached in Massachusetts and Connecticut in 1749 
and 1750, when exchange was quoted at 11 00, 
indicating a depreciation of nearly 9:1, In 
Rhode Island, the old tenor bills finally sank to 
23 for I. In the middle colonies the depreciation 

1 In Rhode Island, says Mr. Bates, one emission of bills " only 
created the demand for the next." Bates, 33. When Connecticut 
had issued enough paper to cause a depreciation of fifty per cent, 
complaints of a scarcity of money became so numerous that the 
legislature once more made taxes payable in produce. Bronson, 38, 
56. The same thing occurred in Massachusetts. Felt, 76. Hutch- 
inson describes these complaints of the scarcity of money in Mas- 
sachusetts. Hutchinson, History, II. 211, 340, 341. In Virginia, 
in 1776, when the state had issued ;f 350,000 and Congress had 
emitted ]$io,ooo,ooo, ''freeholders" petitioned the legislature for 
more currency. Phillips, I. 200. For such complaints of a lack 
of money in the time of superabundant issues of paper, see Bates, 
33-35; Potter and Rider, 33-34; Hutchinson, History, II. 197, 
210,295; Bronson, 32; Shepherd, 414; Femow, 321; Phillips, I. 
69, 70» 74. 76, 77- 




never reached such figures. In Pennsylvania 
exchange once reached i8o, while the par of 
exchange for specie was not higher than i66J. 
In Maryland exchange rose from 133 to 250. In 
North and South Carolina the paper currencies 
finally sank to one-tenth the value of sterling.^ 

Such fluctuations in the standard of value 
wrought intense hardships. In 1741, Governor 
Shirley stated in his message to the Massachusetts 
legislature : " A creditor who has the misfortune 
of having an outstanding debt, of the value of 1000 
pounds sterling, contracted anno 1730, can now 
receive no more in our courts of judicature , . . 
than the value of about 650 pounds sterling." 
Between 1741 and 1749 exchange rose from 550 
to 1 100, so that, as Douglass said, " Every honest 
man not in debt lost about one-half of his personal 
estate." 2 A widow who had had an income of £$ 
found by 1748 that this was reduced to about one- 
eighth of its original value.^ Clergymen's salaries 
suffered a corresponding reduction, so that Massa- 
chusetts passed an act allowing them to receive 
bills of credit *' only at their real value." * Harvard 
College is said to have lost ;^ 10,000, and the Scotch 
Charitable Society of Boston suffered sixty-six per 

^For New England in general, see Douglass, Summary, I. 494; 
Wright, LXI. For Rhode Island, Potter and Rider, 100. For the 
middle colonies, Douglass, Summary, I. 494, II. 365. For the 
Carolinas, Ramsay, II. 168; Douglass, Summary, II. 494. 

* Douglass, Summary, I. 497, II. 14. , i 
*Minot, I. S4. 

* Felt, 79. 



cent loss upon the repayment of some of its invest- 
ments.^ Under such conditions of demoralization, 
it is not strange that the legislature of Massachu- 
setts complained of "universal infectious corrup-. 
tion " in the conduct of public affairs, and that 
Hutchinson observed that " the morals of the peo- 
ple depreciate with the currency." ^ 

In 1749, when the currency had depreciated to 
nearly one-eleventh of its nominal value, Massa- 
chusetts succeeded in redeeming it at a rate of 7^ 
shillings of paper for one shilling of specie.' This 
was accomplished with the aid of a grant of 
money which Parliament had voted in order to 
recompense the colony for its expenditures during 
King George's War.* Efforts were made to secure 
the cooperation of the other provinces of New 
England, but without immediate result. Connecti- 
cut finally adopted a plan similar to that followed 

1 Douglass, Discourse, 366; Q,J, £,, XI. 143, 

'Douglass, Summary, I. 500; Hutchinson, History, H. 391. 
Douglass has described very well ''The Mischiefs arising from a 
large Paper Currency." He shows, for instance, that wages 
changed less rapidly than prices, so that laborers suffered from the 
disturbances caused by paper money. He states that in 171 2, when 
silver was at Ss, per ounce, wages were 5^. a day; while in 1739, 
when depreciation had driven silver up to 2gs, per ounce, wages 
were only 12s, 9. day. See Discourse, 322-325. 

•The act provided that 451. old tenor should be exchanged for 
one dollar. With a dollar rated at 6^., this gives a ratio of 7} : i. 

^Hutchinson, I. 392-395; Douglass, Summary, II. 15-16; Felt, 
1 18-122, 131; Weeden, 674-677; Douglas, Fin. Hist., 131-133. 
Shortly before this action was taken, the currency had fallen into 
such a wretched condition of depreciation, that people were driven 
to barter. Minot, I. S4. 



by Massachusetts, and decided to retire her cur- 
rency at the rate of 8| for i. Some years later, 
New Hampshire made a tardy provision for at 
least a part of her paper issues ; and Rhode Island 
exchanged her bills for treasury notes, or allowed 
them to be paid for taxes at a high rate of depre- 
ciation.^ The opponents of resumption in Massa- 
chusetts predicted that such a policy would deprive 
the people of a circulating medium, and ruin all 
branches of trade. The result was that a specie 
currency was restored and industry prospered. 
Prior to this time, Newport had controlled the 
importation of West India goods into some parts 
of Massachusetts. This trade at once passed over 
to Boston and adjoining ports, and Rhode Island 
paid the penalty for her obstinate adherence to a 
fluctuating paper currency.* 

iFelt, ii8; Bronson, 67-73; Papers of N. H., V. 565-568, 574, 
VI. 225, 226, VII. 58, 65, 145; Belknap, XL 425; Potter and 
Rider, 67, 80, 97. 

^ It seems probable that the resumption of a specie basis was 
attended with some temporary inconvenience. A private letter 
from Boston, of the date of June 17, 1750, says: "Trade is quite 
dead, the Town is dull and still as on a Sunday; full of Goods, but 
no Money to buy; . . ,** Mag, of Amer, Hist, \\,62*j. Douglass 
refers to a similar situation in 1750. Summary, II. 88. A threat- 
ened uprising of the paper money men resulted in a passage of a 
stringent riot act. Felt, 1 29-1 31. But all such difficulties were 
merely temporary, for the colony certainly enjoyed great subse- 
quent prosperity, while the trade of Rhode Island languished. 
Weeden, 676, 736; Potter and Rider, 24, 68. The French and 
Indian War and the confusion attending the controversy with Great 
Britain were injurious to trade, but yet the colony prospered until 
the Revolution. Htltchinson could write in 1771: "Commerce 



During this carnival of fraud and corruption, 
interference by an act of Parliament had often 
been invoked. English merchants had sometimes 
complained to the Board of Trade concerning the 
losses to which the dishonest American currencies 
had subjected them. The instructions of colonial 
governors frequently directed that consent should 
be refused to the passage of laws for the emission 
of paper money.^ The governors often opposed 
most vigorously all attempts to issue a depreciating 
currency, and violent contests with the legislative 
bodies not infrequently ensued. In Massachusetts, 
the governor's salary was refused when he could 
not be induced to consent to such measures ; and 
in South Carolina, no acts passed the assembly for 
four years on account of a deadlock over the sub- 
ject of paper money.* Such occurrences were by 
no means peculiar to these two colonies, and the 

never was in a more flourishing state. The Massachusetts province 
was, in this respect, the envy of all the other colonies; and while 
the other colonies, by encouraging a delusive paper medium of 
trade, had banished silver and gold, the Massachusetts had drawn 
them, not only from several of the other colonies on the continent, 
but from Jamaica, and more or less, every year, from Spain and 
Portugal, and had obtained the name of the silver money colony.'' 
History, III. 350. See also II. 395-396, 

^ In 1720, instructions to this effect were sent to all the govern- 
ors, and such instructions were commonly repeated during the 
next forty or fifty years. Docs, of N. Y., V. 539; Papers of N. H., 
III. 814 ; Col. Recs. of Penn., III. 261 ; Greene, 163 ; Hutchin- 
son, II. 339 ; Felt, 76, 81, 84 ; PhUlips, I. 15, 51-55. 

> Hutchinson, II. 298; Greene, 173; Whitney, 11 3-1 14; 
Winsor, V. 328-329 ; Ramsay, II. 165. 




political party that stood for popular rights, as 
against the prerogative of the royal or proprietary 
governor, regularly included all the advocates of 
paper currencies,^ When threats or open defiance 
failed, the assemblies were accustomed to resort 
to bribes in order to accomplish their purpose.^ 
Finally, in 175 1, Parliament passed an act pro- 
hibiting any of the New England colonies from 
emitting bills of credit and making them legal 
tender ; but permission was given to issue treasury 
notes that should be redeemed at the end of brief 
periods from the proceeds of taxation, and should 
not be given a forced circulation.^ Such a whole- 
some restriction was immediately denounced as 

^The New Jersey assembly refused supplies for two years on 
account of the governor's rejection of various measures, among 
which was a bill for issuing more paper. Mulford, 346 ; Pap. of 
Morris, 213-226, 250, 270, 274, 310, 314-320. In New York, the 
right to limit the time of revenue bills was used to extort consent 
to issues of bills of credit Docs, of N. Y., V. 805. The Massa- 
chusetts legislature refused to provide for the debts of the province 
because Governor Belcher would not issue paper money. Felt, 
86. See also Shepherd, 424-428 ; Fernow, 323 ; Williamson, II, 
65 ; Felt, 69, 76-79, no. 

2 Scharf, II. 35-36 ; Douglass, Summary, II. 14, 365 ; Phillips, 
I. 72 ; Pap. of Morris, 2i6; Williamson, II. 8i. The Massachu- 
setts legislature reduced the salary of Governor Shute, who was 
unfriendly to the projects of the paper money men ; while Governor 
Shirley, who proved more pliant, had his allowances and perquisites 
increased. Douglass, Summary, I. 492, II. 17-18. 

• A number of writers had invoked interference by Parliament. 
See Douglass, Discourse, 311 ; Ashley, Memoirs, 61-63. The 
House of Commons first considered the question in 1740, when it 
directed the colonial governors to refuse assent to laws for the 



" destructive of the liberties and properties of his 
Majesty's subjects" in the colonies; but, in 1764, 
Parliament passed another act which imposed a 
similar regulation upon all the other plantations, 
and required that outstanding bills of credit should 
be gradually retired.^ 

This legislation put an end to probably all 
further issues of legal tender bills.^ But " treasury 
notes" or "orders" or bills of still other names, 
receivable at the provincial treasuries, were exten- 
sively employed until the time of the Revolution. 
The New England colonies made a regular prac- 
tice of issuing treasury notes that were redeemed 
by taxes within short periods, and usually bore 
interest. Similar issues under various names can 
be found elsewhere.^ In 1769, Maryland suc- 
ceeded in emitting j)3i8,oco of bills upon loan. 

emission of legal tender bills. Journ. of H. of C, XXIII. 527-528. 
Four years later, a bill prohibiting further issues was introduced. 
Idem^ XXIV. 658. For the act of 1751, see Stat, at Large, 24 
George II. c. 53. 

1 Stat, at Large, 4 George III. c. 34. For Franklin's efforts in 
opposition to this measure see Works of Franklin, IV. 11, 79-94. 
In 1773, an explanatory act specified that treasury notes could be 
made receivable at the provincial treasuries. Stat, at Large, 13 
George III. c. 57. 

^The writer has been unable to find any legal tender issues after 
1763 except one in South Carolina. Stat, of S. C, IV. 312, 313. 
But this was merely a reSmission of old legal tender notes that had 
been outstanding for many years. 

•Papers of N. H., VI. 506-507 ; Felt, 31 ; Bronson, 81-84 ; 
Potter and Rider, 94, 100, 209 ; Shepherd, 433 ; Ripley, 157, 161 ; 
Stat of S. C, IV. 323. 



and a larger issue followed in 1773.^ In 1771, 
New York created another bank of ;£ 120,000, but 
the bills were made legal tender only at the treas- 
ury; and finally, upon the eve of the Revolution, 
Pennsylvania and New Jersey attempted to rees- 
tablish their loan offices.^ In 1774, therefore, 
there must have been a considerable amount of 
paper in circulation in America. Pelatiah Webster 
estimated the "circulating cash" of the thirteen 
states at ;$ 12,000,000 at this time.® He thought 
that one-half or three-fifths of the currency of 
Pennsylvania was made up of paper, and believed 
that this proportion was not exceeded in other 

Under the political conditions that prevailed in 
the colonies, it was inevitable that the question of 
paper money should get into politics. In Mas- 
sachusetts, this occurred in 171 3, when banking 
projects were being agitated,* and eight years later 
Dr. Trumbull tells us that the paper money party 
had become identified with the "popular" or 
" liberal " party .^ This was natural, since the 
governors and their councils often combated 
vigorously all measures that tended to depreciate 
the currency. Sometimes the governors undoubt- 
edly opposed a paper medium because they had a 

1 Laws of Md., 1769, c 14 ; 1773, c. 26. 

* Hickcox, Bills of Credit, 45-46 ; Phillips, I, 29, 76 ; Feraow, 


« Webster, 142. 

* Hutchinson, Hist., II. 188. 

* Trumbull, 30. Cf. Hutchinson, Hist., II. 394, 



just appreciation of its evils ; at other times they 
seem to have been concerned chiefly with the 
prospect that their fixed salaries would inevitably 
be paid in bad money; and, often enough, they 
received from England explicit instructions that 
were intended to leave them no opportunity to 
exercise their own discretion.^ In colony after ^'^^ 
colony, party lines came to be drawn upon this sole 
issue ; and when opposition was encountered from 
the governors or councils, deadlocks frequently 
ensued. Public disturbances were often aroused 
by these controversies over paper money, and a 
factional and disorderly spirit was engendered.^ 
There can be no doubt that the debtor class, as a 
rule, accorded an active support to the inflationist 
party ; and conducted a persistent agitation for a 
cheap currency with which existing debts could 
be more easily paid. Even Franklin was unable 
to deny, in 1764, the truth of the allegation that in 
some colonies, at least, paper money had been 
issued " with fraudulent views " through the influ- j 
ence of the debtor classes.^ Douglass wrote, in >l 
1749: "The Parties in Massachusetts Bay at 
present, are not the Loyal and Jacobite, the Gov- 
ernor and Country, Whig and Tory, or any religious 
sectary denominations, but the Debtors and the 

^ Sometimes the council proved more strenuous than the governor 
in opposition to issues of paper, and stood out against the inflation- 
ists even when the governor had yielded. See Greene, 77-78, 163. 

* This subject has been treated sufificiently in a previous note; 
but see, in addition, Douglass, Discourse, 331-332. 

« Works of Franklin, IV. 89. 



Creditors. The Debtor side has had the ascendant 
ever since anno 1741, to the almost utter ruin of 
the country/'^ He said: "Paper-money-making 
assemblies have been legislatures of debtors, . . . ; " ^ 
and as much has been admitted by several of the 
historians of colonial affairs.^ It is probable that 
Thomas Paine did not overdraw the picture when 
he wrote:* "There are a set of men who go 
about making purchases upon credit, and buying 
estates they have not wherewithal to pay for; 
and having done this, their next step is to fill the 
newspapers with paragraphs of the scarcity of 
money and the necessity of a paper emission, then 

1 Summary, I. 535. 

^ Idem^ I. 310. Elsewhere he says: "Men are chosen into 
the legislature and executive parts of their government, not for 
their knowledge, honour, and honesty, but as sticklers for depreci- 
ating . . . the currency, by multiplied emissions : this year, 1750, the 
parties amongst the electors of assemblymen were distinguished by 
the names of paper money makers, and the contrary." Idem^ II. 
87; cf. I. 314. Referring to the journal of the house for August 
17, 1747, he says that complaints sent to the legblature concern- 
ing depreciation were " referred to committees consisting of the 
most notorious depreciators.'' Idem, II. 14. Cf. Discourse, 330, 

•See Hutchinson, Hist, II. 295, 353. In 1740, a majority of 
the representatives elected in Massachusetts were subscribers to the 
land bank scheme, and at another time several of the leading repre- 
sentatives were notorious debtors. In Rhode Island, the evidence 
is perfectly clear. In 1731, the paper-money party secured com- 
plete control. Bates, 36-37; Potter and Rider, 26, 30, 82; Ar- 
nold, II. 53; Recs. of R. I., V. 312. On other colonies see 
"Weeden, 490; Bronson, 42, 77; Fernow, 321; Ripley, 160; Wil- 
liamson, II. 81; Col. Recs. of N. C, IX. 76. 

* Paine, II. 178. 




to have a legal tender under pretence of supporting 
its credit, and when out, to depreciate it as fast as 
they can, get a deal of it for a little price, 
and cheat their creditors ; and this is the concise 
history of paper money schemes." 

There is evidence that, as time went on and the 
lessons of sad experience were learned, the leading 
merchants and propertied classes in the colonies 
began to appreciate fully the evils of the fraudu- 
lent paper currencies. As early as 1714, a town 
meeting in Providence protested against further 
issues of paper.^ At about the same time in the 
assembly of New York, the members from New 
York City opposed an increase of the bills of 
credit.^ In 171 7, merchants of South Carolina 
protested against the policy of the inflationists in 
that colony.^ Three years later, Thomas Hutch- 
inson and other leading citizens of Boston urged 
the legislature to emit no more bills upon loan, and 
to retire outstanding issues as soon as practicable ; 
while, at the same time, Salem instructed her rep- 
resentatives to oppose further measures of infla- 
tion.* In 1723, "Gentlemen and Merchants of 
Philadelphia" pointed out to the legislature the 
danger attending the use of paper money ; ^ while 

1 Arnold, II. 53. * Fernow, 318. 

•Ramsey, 11. 164; Carroll, II. 147-148. 

*Felt, 72, 73. 

•Shepherd, 406-409; Annals, VIII. 52-53; Proud, II. 152-162. 
The merchants seem to have drawn their arguments from Pollex- 
fen's Discourse of Trade, Coin, and Paper Credit, a copy of which 
was in the library of James Logan, one of the objectors. 
K 49 


Franklin has written concerning the Pennsylvania 
issues of 1729: "The wealthy inhabitants op- 
posed any addition, being against all paper cur- 
rency, from an apprehension that it would 
depreciate, as it had done in New England, to 
the prejudice of all creditors."^ In 1731, mer- 
chants of Newport protested against renewed 
emissions of bills of credit in Rhode Island.^ In 
Massachusetts, Hutchinson tells us^ that, when 
the land bank of 1740 was under consideration, 
"men of estates and the principal merchants in 
the province abhorred the project. ..." At 
nearly the same date, Douglass said that "they 
who call out loudest for this Paper Medium, are 
not our large Traders."* In 1750, leading citizens 
of Rhode Island sent to the King a remonstrance 
against the conduct of the paper-money party, 
stating that the landholders of the colony had 
mortgaged their lands as security for the loans 
extended by the province, and now found it to 
their interest to increase the volume of paper in 
order that they might pay their debts with 
worthless currency.^ Two years later twenty-five 
merchants and traders of Hartford presented to 
the Connecticut legislature the following interest- 
ing petition for relief : " As the medium of trade 

1 Works of Franklin, I. 152. 

« Records of Rhode Island, IV, 457-461. 

8 Hatchinson. Hist, II. 354. 

* Discourse, 330. 

* Records of Rhode Island, 311, 330, 334; Potter and Rider, 




is that whereby our dealings are valued and \J 
weighed, we cannot but think it ought to be es- 
teemed of as sacred a nature as any weights and 
measures whatsoever, and in order to maintain 
justice, must be kept as stable; for as a false 
weight and a false balance is an abomination 
to the Lord, we apprehend a false and unstable 
medium is equally so, as it occasions as much 
iniquity, and is at least as injurious."^ Finally, 
Pownall has left us the following explicit state- 
ment : " The majority of the men of business and 
property in the Colonies have ever heretofore 

{wished to have the assemblies restrained by act 
of Parliament, from the power of giving the sanc- 
tion of a legal tender to their paper money." ^ 

At this point it may prove interesting to review 
briefly the arguments that were advanced in the 
eighteenth century for and against government pa- 
per money. The first issue of bills of credit in Mas- 
sachusetts called forth a pamphlet, written probably 
by Cotton Mather, in defence of paper money ; ^ and 
the controversies that ensued during the next 
eighty or ninety years resulted in a veritable del- 
uge of writings dealing with the subject. Nearly 
; thirty pamphlets appeared between 17 14 and 1721; 
and, in 1728, government issues of paper were 

1 Bronson, 71. 

« Pownall, I. 198. 

•Quotations from this pamphlet are given by Trumbull, 15-18. 
Mather held that money '* is but a Counter or Measure of men's 
Properties." He favored a paper currency, "an abiding Cash," 
iince " no man will carry it to another Country." 


defended in a master's thesis at Harvard College.^ 
The flood of publications continued until the close 
of the century, when it was thought that the Fed- 
eral Constitution had finally barred the door to fur- 
ther issues of bills of credit.^ 

The advocates of paper currency always claimed 
that it was the only means by which a sufficient 
circulating medium could be secured, and many 
historians have accepted this plea with discredit- 
able complacency. The opponents argued, on the 
other hand, that an adequate stock of specie always 
existed until it was displaced by a cheaper form of 
money ; and that complaints of a scarcity of silver 
were never so common as they always became after 
repeated emissions of bills of credit.* When, for 
instance, the inflationists in Massachusetts were 
endeavoring to secure larger issues of paper, in 
1 71 2, Judge Sewall answered, in his speech in the 
legislature: "I was at making the first bills of 

1 Weeden, 485; Proc. Mass. Hist. Soc, XVIII. 124, 125. 

* Trumbull gives copious extracts from many of these pamplilets. 
Other extracts may be found in Q, J. E,, XI. 70-91, 136-160. 
Lists of scores of such publications may be found in Thomas, II. 
370 et seq. ; and Douglas, Fin. Hist., 138-146. Especially valuable 
is Winsor, v. 170-176. See, finally, a reprint of a pamphlet by 
Hutchinson, in Proc. Mass. Hist. Soc., Feb., 1899. 

* Douglass, Discourse, 338; "A Countryman's Answer," quoted 
by Felt, 74. In a protest of five members of the Rhode Island 
legislature, in 1740, against the issue of more paper, are found 
the following words : " In respe^ to trade, this bank will probably 
so far depreciate the whole paper currency, that we shall have, in 
reality, a less medium of exchange, and all complaints of scarcity 
of money greatly increased." Recs. of R. I., IV. 580. Cf. Hutch- 



credit in the year 1690. They were not made for 
want of money ; but for want of Money in the 
Treasury."^ Dr. William Douglass argued in 
1740: "The more a Country grows in good Trade, 
the more true Medium of Trade it acquires/' ^ 
At a later date, John Witherspoon, Pelatiah Web- 
ster, and Thomas Paine voiced similar opinions.^ 
These writers always insisted, as Douglass had 
done in 1740, that "a trading Country must have 
regard to the universal commercial Medium, which 
is Silver; or cheat, and trade to a Disadvantage."* 
Like Paine, they inquired: "But why, since the 
universal custom of the world has established 
money as the most convenient medium of traffic 
and commerce, should paper be set up in prefer- 
ence to gold and silver .^"^ Frequ.^xtly, the advo- 
cates of bills of credit argued that a large paper 
currency would stimulate trade, and thus lighten 
the weight of the taxes that would ultimately be 
levied for redeeming the bills issued.® Douglass 

inson, Hist., II. 197, 210, 340-341. Douglass argued that the 
emission of a depreciating paper currency " does not add to the 
real Medium, but rather diminishes from it" Discourse, 329. 
Forty years later, Pelatiah Webster made the same contention. 
Webster, 6. Writing in 1739, Douglass says that, with ;f 630,000 
of paper circulating in New England, " Money was never so scarce 
and Debts worse paid." Discourse, 333. Cf. also Idem^ 341. 
1 Coll. Mass. Hist. Soc, Fifth Series, VI. 366. 

* Discourse, 342. 

* Witherspoon, Works, IX. 45, 50 ; Webster, Essays ; Writings 
of Thomas Paine, II. 132-187. See especially. Writings, II. 179. 

* Discourse, 294. * Paine, II. 178. 

* Hutchinson, Hist, II. 219, refers to these arguments, 



replied that inflation caused extravagance and spec- 
ulation ; and Paine retorted : " Paper money is like 
dram drinking ; it relieves for a moment by deceit- 
ful sensation, but gradually diminishes the natural 
heat, and leaves the body worse than it found it."^ 
When the inflationists urged that magnificent pub- 
lic improvements could be undertaken by means 
of government issues,^ Douglass reminded them 
that some one must ultimately pay for all such 
indulgences.^ Again, when depreciation set in, 
and specie rose to a premium, the friends of paper 
always claimed that the bills of credit had not 
deteriorated, but that silver had risen in value on 
account of the demands of persons who desired to 
export bullion. To this effect Franklin wrote in 
1729: "I need not say anything to convince the 
judicious that our bills have not yet sunk, though 
there is and has been some difference between 
them and silver ; because it is evident that the dif- 
ference is occasioned by the scarcity of the latter, 
which is now become a merchandise, rising and 
falling like other commodities as there is a greater 
or less demand for it or as it is more or less 

1 Discourse, 340-341, 365 ; Paine, II. 183-1S4. 

* See quotations given by Felt, 65, 72. Governor Ward, defend- 
ing Rhode Island's issues, argued that the money had been expended 
for public buildings, fortifications, and the like. Records of Rhode 
Island, v. 8-14. Cf. Hutchinson, Hist., II. 219, 295. 

•"The unthinking Part of our People do not consider, that 
every emission of Paper Credit called Money, is laying a heavy Tax 
upon us, which in Time will contribute to our Misery." Discourse, 



plenty." ^ Douglass replied : " The repeated large 
Emissions of Paper Money are the Cause of the 
frequent rise of the Price of Silver and Exchange." 
This, he argued, was equivalent to saying that the 
bills had depreciated. Under such conditions, the 
premium on silver must follow, " the same as the 
Tides do the Phases or Course of the Moon."^ 
After the depreciation of the paper had gone to 
such lengths that it could no longer be denied, its 
advocates always advanced, with the greatest com- 
placency, the suggestion that the fall in the value 

1 Works of Franklin, I. 376. In 1764, Franklin repeated 
this argument, and at greater length. Works, IV. 89--91. He 
said that soon after the emission of the first paper in Pennsylvania, 
** a difference soon arose " between silver and paper, due to the demand 
for silver for export In 1721, when exchange had risen from 133 
to nearly 270, the Massachusetts house of representatives thought 
that a prohibition of selling bullion at more than Ss, per ounce 
would remedy the difficulty, and that depreciation would not have 
taken place at all if such a measure had been adopted at the very 
start. Felt, 77. In 1740, Governor Ward of Rhode Island, and in 
1750 the legislature, attributed the depreciation to the pernicious 
practice of merchants in offering a premium for silver, **to the 
injury and oppression of many poor widows, orphans, and others." 
Potter and Rider, 74, 161, 188. This was in the face of a rise in 
exchange from 133 to 550 in 1741, and iioo in 1749. The solici- 
tude of a legislature of paper-money inflationists for widows and 
orphans is most interesting. 

^ Discourse, 325. Hutchinson said of a bill prohibiting silver to 
be sold above proclamation rates : " Such an act can no more be 
executed than an act to stop the ebbing and flowing of the sea." 
Hist, II. 222. See Writings of Paine, II. 179. In 1723, a petition 
of Philadelphia merchants argued as follows : " But, from hence a 
sure rule may be taken, in relation to paper, that by so much as the 
value of the public bills sink, by so much will gold and silver rise, 
in proportion to their intrinsic worth." Proud, II. 162. 



of the bills of credit had operated as a gradual and 
insensible tax upon the community; so that no 
great harm had been done after all. To this opti- 
mistic view it was readily replied that such a tax 
was the most unjust and harmful method ever 
devised for meeting public expenditures. It taxed 
only those who were so situated that they could 
not avoid it, and benefited sharpers, speculators, 
and dishonest debtors. It devoured the estates of 
widows and orphans, paralyzed legitimate business 
undertakings, and wrought untold injury to public 
and private morals.^ Yet the advocates of a de- 
preciating currency still insisted that bills of credit 
were a necessity, and that government should 
assume its proper duty of supplying money directly 
to the people. No better answer has ever been 
given than is found in the following words of Wil- 
liam Douglass : ^ "In all Countries excepting in 
Paper Money Colonies, the People support the 
Government : it is absurd to imagine that a Gov- 
ernment finds Money for its People, it is the Peo- 
ple who by their Trade and Industry, provide not 
only for their own Subsistence, but also for the 
Support of Government. . . ." 

This chapter of our monetary history presents 
a sufficiently dark and disgraceful picture. But 
certain important facts still remain to be noted 
before we pass from the subject of provincial 
paper currencies. For eighty years the people of 

1 Douglass, Discourse, 322-325 ; Webster, 30-32. 
^Dbcourse, 342-343. 



the colonies were schooled in the belief that bills 
of credit furnished a proper and convenient means 
of defraying public expenditures, ordinary as well 
as extraordinary. Such issues, of paper would 
depreciate, and could ultimately be wholly repu- 
diated, or could be redeemed at a fraction of their 
face value. Under such circumstances, there inev- 
itably developed a strong disinclination to permit 
taxation to be practised on any scale commensu- 
rate with the public needs.^ The habit of paying 
taxes readily and regularly is not easily acquired, 
while it is lost with the utmost facility. The colo* 
nists, for three generations, were trained in a bad 
school of public economy ; and had learned lessons 

^ In Massachusetts, in the first half of the eighteenth century, the 
policy of the legislature was " the abandonment of the constantly 
increasing current expenses of the government, to be met by larger 
and larger issues of bills of credit." Douglas, Fin. Hist, 121. 
During a long term of years, only one budget provided for current 
expenses. Cf. Hutchinson, II. 339. Pennsylvania, although more 
moderate in her issues of paper prior to 1775, is found, on the very 
eve of the Revolution, yielding to the ** temptation to overcome 
instant wants by means of larger sums payable in the future." 
Phillips, I. 28. Cf. Shepherd, 427. At the close of the colonial 
period, Virginia, which had been far more conservative than most 
of the colonies in her financial policy, was in a condition which Mr. 
Bancroft describes as follows : "Virginia was, moreover, unpre- 
pared for war. Its late expedition against the Shawnee Indians 
had left a debt of a hundred and fifty thousand pounds ; its cur- 
rency was of paper, and it had no efficient system of revenue." 
Bancroft, Hist., IV. 144. With such conditions prevailing in the 
larger and more populous colonies, it is easy to conceive of the 
situation elsewhere. Professor Sumner has described admirably 
the tardy and inadequate development' of colonial taxation. Sumner, 
Financier, 1. 11-54. 



that were soon to bear bitter fruit. It is not at 
all remarkable that, in the Continental Congress 
of 1775, members are reported to have entertained 
strong objections to burdening their constituents 
with taxes, when it was possible to send to a printer 
and obtain a wagon load of money, one quire of 
which would pay for the entire sum needed to pros- 
ecute the struggle for independence.^ In opposing 
the attempts of Parliament to levy taxes upon them, 
the colonies were contending not only against " tax- 
ation without representation," but also against tax- 
ation in any form. They were quite as certain 
that it was impracticable to secure representation 
in that body, as they were that Parliament ought 
not to tax them without their consent.^ Finally, 
as a matter of simple historical fact, there can be 
little doubt that the acts of 1751 and 1764, which 
suppressed further issues of bills of credit, contrib- 
uted not a little to the final breach with the mother 
country. In 1744, when Parliament was consider- 
ing the advisability of prohibiting colonial issues 
of paper money, the New York assembly resolved 
that such a measure would be contrary to the con- 
stitution of Great Britain, incompatible with the 
rights and liberties of Englishmen, and likely to 

1 Webster, 7-8. 

2 The declaration of rights, adopted by the Stamp Act Congress 
in 1765, maintained that taxes could not be imposed upon the 
colonists without the consent of their representatives, and that the 
colonies, ** from their local circumstances,'' could not be represented 
in Parliament. Niles, 457. Professor Sumner has stated the 
matter very clearly. Sumner, Financier, I. 25. 



subject America to the absolute will of the Crown.^ 
The action finally taken by Great Britain aroused 
the most bitter feelings of resentment ; and the 
law of 1764 was enacted at a time when the minds 
of Americans were excited over the Stamp Act, 
I and the wisdom of the restrictions imposed upon 
the paper currencies was the less likely to be 
admitted. In 1766, when he was examined before 
the House of Commons, Franklin gave it as his 
deliberate opinion ^ that one reason for the impa- 
tience and disrespect which the colonies were 
manifesting toward Parliamentary authority was 
" the prohibition of making paper money." Too 
little attention has been given to this fact by most 
American historians.^ 

1 Hickcox, Bills of Credit, 32 ; Winsor, V. 203. Similar decla- 
rations were made in other colonies. See Felt, 81, 115 ; Bronson, 
68 ; Pap. of Morris, 221. 

« Works of Franklin, III. 418. Cf. IV. 106. 

•Mr. Felt seems to be the first writer to appreciate this fact. 
Felt, 132. 




The story of our Revolutionary paper money 
supplies the next chapter in the experience of the 
United States with a cheap medium of exchange.^ 
With the inception of the struggle against Great 
Britain, the colonies were confronted with the prob- 
lem of raising the supplies necessary for the pros- 
ecution of the war. In the spring and early 
summer of 1775, revolutionary assemblies or con- 
ventions were convoked in various provinces, and 
preparations were made for the public defence. 
With the restraining influence of the royal govern- 
ors and the acts of Parliament removed, it was 
practically certain that issues of paper would be 
renewed. The disinclination to pay taxes, which 
had been fostered by eighty years of false finan- 
cial methods, inevitably asserted itself in a refusal 
to meet by heavy taxation the burdens incurred in 
a war that was caused in large measure by oppo- 
sition to the taxing power of Parliament. 

The Continental Congress has often been blamed 
for resorting to the disastrous expedient of issuing 
paper money, but the financial policy of the Revo- 

1 On this subject much has been written. See bibliography in 
Bullock, 122. Since this bibliography was written, two other 
accounts of the continental currency have appeared. See White, 
134-148 ; Holt, in Sound Currency, V. 



lution was practically settled by the provincial 
assemblies. Congress did not convene in Phila- 
delphia until May lo, and did not determine to 
issue bills of credit until June 22.^ Meanwhile, 
Connecticut had decided in April to emit paper 
money ; and Massachusetts had* adopted a similar 
measure seven days before Congress assembled.^ 
Before the month of May had expired, Rhode 
Island pursued a similar course; and, in June, 
New Hampshire, Pennsylvania, and South Caro- 
lina followed suit* During the next few months 
all the other colonies, without a single exception, 
decided to provide the sinews of war by means of 
bills of credit* 

Although the Continental Congress was a revo- 
lutionary assembly which might conceivably have 
attempted to assume all the authority of a strong 
national government, it is almost certain that such 
a course would have resulted in the downfall of 
that body. It was in reality a consultative assem- 
blage, whose powers were limited by the wishes of 
the several colonies. In order to exist and to 
maintain any respect for its authority. Congress 
had to be governed by the temper of its constitu- 
ents ; and, in respect to the proper financial policy, 

ijourn. of Cong., June 22, 1775. 

«Conn. Recs., XIV. 432 ; Force, II. 782. 

»Rec8. of R. I., VII. 321 ; Force, 11. 659, 1168 ; Ramsay, II. 
171. For South Carolina, Force mentions no issue before Novem- 
ber 15. See Force, IV. 55. 

* Force, II. 1551, III. 113, 197, 575, 1240; Laws of Del., I. 
571-586 ; Laws of Md., 1780, c. 22, note. 



the wishes of the people of America had already 
been indicated with sufficient clearness by the 
action of the various provincial assemblies.^ These 
bodies had commonly pledged the half or the whole 
of their estates for the preservation of their sacred 
liberties, but they had shown a uniform determina- 
tion to raise money by sacrificing only the estates 
of those people who were helpless to avoid the 
losses of a depreciating currency. It is perfectly 
true that the expenses of any war must, apart from 
help secured in foreign countries, be defrayed out 
of the annual produce of the industry of a people ; 
and that taxation is the safest, surest, and wisest 
method of meeting such expenditures. But the 
hands of Congress seem to have been bound by its 
lack of authority and the manifest desires of the 
people. The New York assembly, and probably 
some others, had conveyed to the men gathered 
in Philadelphia explicit statements of their sen- 
timents;^ and the actions of various provincial 

^ For a somewhat different view see Bronson, 146-156. 

^The New York provincial congress, as early as May 26, sent to 
the New York delegates at Philadelphia a letter stating that, since 
it would be impossible to conduct the war without paper money, 
the council was about to consider that subject, and would communi- 
cate the results of its deliberations as soon as possible. Force, II. 
1255. The New York council appointed a committee, of which 
Gouverneur Morris was a member, to consider the subject of a 
paper currency. Sparks, Morris, I. 38. This committee reported 
in favor of a continental currency on May 30, and its report was 
adopted and forwarded to the delegates in Philadelphia. Force, 
II. 1 262-1 264, 1 281. New Hampshire also expressed its desire for 
paper money. Papers of N. H., VII. 483. 



congresses in actually issuing paper were more 
significant than any words.^ 

Thus the Continental Congress and the individual 
colonies, or states, undertook to carry on the strug- 
gle for independence by the aid of bills of credit. 
The dangers of such a course were fully appreci- 
ated by many men, but the temper of the great 
body of the people could not be mistaken. Recent 
historians have investigated with great care and 
entire fairness the extent and character of the 
opposition which the revolutionary movement en- 
countered from many of the most intelligent and 
respectable persons in America, and have assured 
us that earlier writers have failed to do justice to 
the strength and honesty of that party which con- 
sidered separation from the mother country to be 
unnecessary and undesirable.^ With the history 
of colonial paper currencies before us, it is reason- 
able to believe that the fe;ar of reckless issues of 
bills of credit was certainly one cause for the hostile 
attitude assumed by a large portion of the conser- 
vative, propertied classes.^ 

^ How well Congress understood the disposition of the colonies, 
and the limits of its own authority, is well shown in some " Obser- 
vations on the Finances of America," which were sent to Franklin 
in 1778. The " Observations" pointed out that, since America had 
"never been much taxed" and the war was "upon the very 
question of taxation," " the laying of imposts, unless from the last 
necessity, would have been madness." Sec. Joum. of Cong., II. 

^ See Tyler, I. 293-315 ; Amer. HisU Rev,, I. 24-25 ; Sumner, 
Hamilton, 48-51, 53-61. 

*£ven John Adams was afraid of what the debtor class would 



Congress began by issuing $6,cx)0,cx)0 of paper 
money before the close of 1775, and urged the 
states to redeem their respective quotas of the 
bills by imposing taxes.^ But the states refused 
to resort to taxation, except for inconsiderable 
sums, and continued to emit increasing amounts 
of their own paper. After unsuccessful efforts to 
raise revenue by such expedients as a lottery and 
a domestic loan,^ larger continental issues had to 
be emitted. In 1777, Congress began to make 
requisitions upon the states for money that was to 
be raised by taxes which only the states could 
impose ; but these requests met with such a par- 
tial compliance that further issues of paper were 
placed in circulation. Several years elapsed before 
the states instituted effective systems of taxation, 
and little assistance was secured from this source,^ 
Loans and subsidies furnished by France brought 
considerable sums into the federal treasury; but 
more and more paper was emitted, the amounts of 
the issues increasing as the depreciation of the 
currency progressed. By the end of 1779, Con- 
gress had issued $24i,Soo,ocx) of the continental 
bills of credit ; while the states had gradually in- 
creased their emissions to more than $200,cx)0,cxx).* 

do if power should pass completely into its hands, '* for half the 
nation are debtors." Works of Adams, II. 420. 

1 Bullock, 125. 

^Idem, 166-167, and references there given. 

^ Idem, 151-164 ; Sunmer, Financier, I. 11-34, II. 64-80; 
BoUes, I. 190-205. 

^Bullock, 125-130. The estimate of the amount of paper 



At the opening of 1781, a dollar in paper was 
worth less than two cents in specie, and the cur- 
rency soon afterward sank in value to such an 
extent that it became practically worthless.^ 

Congress knew, as is shown by its resolution 
adopted Nov. 22, 1777, that "when a quantity 
of money of any denomination exceeds what is 
useful as a medium of commerce, its compara- 
tive value must be proportionately reduced." ^ But 
the unwillingness of the states either to levy taxes 
themselves, or to allow Congress to do so, seemed 
to leave no alternative but to continue the conti- 

issued by the states is from Schuckers, 127. The figures have 
been considered too large by some writers. See Knox, 10. But 
the writer has collected sufEcient data to justify the statement 
given by Schuckers. 

1 Until 1779, the depreciation was fairly gradual. Late in 1775 
and early in 1776 committees of safety and other similar bodies 
took measures to force unwilling persons to accept the money. 
Force, III. 1799, IV. 887, 888, 896, 941, 942, 1211, 1284. By 
May, 1776, the depreciation of the paper has oeen clearly estab- 
lished. Sumner, I. 49-50. The last half of 1776 saw a continuous 
depreciation, until, by the opening of 1777* a depreciation of thirty- 
three per cent was acknowledged by law in Pennsylvania. Phillips, I. 
33. A year later four dollars in paper were equal to no more than 
one dollar in specie ; and by January, 1779, the rate was eight for 
one. During 1779, the currency rapidly declined to one-fortieth 
of its nominal value. Bullock, 133. After 1780, it sometimes cir- 
culated at rates of five hundred or one thousand for one. Webster, 
502 ; Elliot, UI. 472. Finally barbers' shops were papered with 
it, and suits of clothes were made out of it. Breck, 19. 

2 Joum. of Cong., Nov. 27, 1777. Many of the leading Ameri- 
cans understood this perfectly. John Witherspoon and Pelatiah 
Webster are notable examples. See also the extracts given by 
Simmer, Financier, I. 43-44, 95-97. 

F 65 


nental issues. When the bills began to depreciate, 
the states were requested to declare them a legal 
tender for all debts; and this recommendation 
was willingly accepted. Legal tender laws were 
passed, and every possible effort was made to 
force the circulation of the paper.^ Price con- 
ventions were held, and these assemblages made 
futile attempts to regulate prices.^ General Wash- 
ington was authorized to seize whatever supplies 
might be required for his army, and to compel the 
owners to sell their goods at reasonable prices.' 
All such methods were as idle as attempts to vio- 
late the natural laws of money have always proved 
to be. Persons who refused to sell their lands, 
houses, or merchandise for nearly worthless paper 
were stigmatized as misers, traitors, forestallers, 
and enemies of liberty;* but prices continued to 
rise, as the inflation of the currency proceeded 
apace. Stores were closed or pillaged, and mer- 
chants were mobbed, fined, or imprisoned;^ but 
such action merely drove men out of business, and 

^Felt, 169-170; Papers of N. H., VIII. 144; Bronson, 90, 95; 
Hickcox, BUls of Credit, 50; Mulford, 439; Laws of Md., 1777^ 
c. 9; Laws of Del., II. 599; Col. Recs. of N. C, X. 194-196; Mc- 
Call, II. 127, 134; Phillips, I. 31, 32, 78, 199. 

'Sumner, Financier, I. 53-66, 72-78; BoUes, I. 158-167; Byon- 
•on, 92 ; Potter and Rider, 168-171. 

•Journ. of Cong., Dec. 27, 1776; Bullock, 128. 

* Force, III. 1799; Felt, 168; Phillips, I. 78; CoL Recs. of 
N. C, X. 194-196; Sumner, I. 61. 

*Some of the penalties imposed upon " depredators" were fines, 
forfeiture of debts or goods for which paper was tendered, confisca- 
tion of property, imprisonment, and disqualification for holding 



tended to produce a real scarcity.^ Even Wash- 
ington failed to appreciate the true cause of the 
rise in prices, and bitterly condemned those who 
were g^lty of what he called " forestalling *' and 
"engrossing/* 2 Yet men like John Witherspoon 
labored to show him that, "Fixing the prices of 

public oflSces and prosecuting suits at law. Phillips, I. 32, 80, II. 
129-132; Bronson, 90-92, 122; Hening, Stat., IX. 147; Laws of 
Md., 1777, c. 9; Laws of Del., II. 599; Breck, 23-24. 

^A letter from Boston, written in June, 1777, says: "We are all 
starving here. Since this plaguey addition to the regulating bill, 
people will not bring in provision, & we cannot procure the com- 
mon necessaries of life." And, in 1779, the same person wrote: 
"We are likely to be starved thro'out Boston. Never such a 
scarcity of provisions." Coll. of Mass. Hist. Soc., Sixth Series, IV. 
•124, 152. See also p. 139. For a similar complaint see Pickering, 
I. 242. 

^ Many laws were passed against these offences. Bronson, 91; 
Mulford, 463; Sumner, Financier, I. 50, 53, 54, 57-59, 62-64, 77. 
Washington denounced "the monopolizers, forestallers, and en- 
grossers," wishing that they might be hunted down as " pests of 
society " and " hanged upon a gallows five times higher than the 
one prepared for Haman." Writings of Washington, VII. 282. 
But Washington himself had been guilty of discriminating against 
the paper money. In September, 1777, he advised John Parke 
Custis to take care that the rent of a tract of land " shall have some 
relative value, to secure an equivalent for the land and slaves." 
He expressed a willingness to receive paper money, but at " equal 
value to its intrinsic worth at the time of fixing the rent." Idem^ 
VL 90-91. The next year he advised Custis not to sell land 
faster than he could reinvest the purchase money in other lands. 
Exchanging lands for paper might be eventually " a means of giving 
away the estate." Idem^ VII. 214-216. In August, 1779, Wash- 
ington decided to "receive no more old debts" at "the present 
nominal value of the money." The law, he thought, " never was 
nor could have been intended to make a man take a shilling or six- 
pence in the pound for an honest debt." Idem, VIII. 20. 



commodities has been attempted by law in several 
states among us, and it has increased the evil it 
was meant to remedy, as the same practice has 
done since the beginning of the world." ^ And 
Pelatiah Webster insisted that the " utmost efifect " 
of forcing laws " was like that of water sprinkled on 
a blacksmith's forge *';^ but the tender acts were 
not repealed until after the paper had become 
practically valueless.^ 

The misery and iniquity wrought by the depre- 
ciating currency were beyond all description. The 
rise of prices encouraged the most demoralizing 
speculation, while the sudden acquisition of un- 
earned and undeserved wealth by rascals and 
sharpers stimulated the most wanton and shameful 
'^travagance.* Washington has drawn a correct 
picture of the conditions, the cause of which he did 
not originally understand: "If I were to be called 
upon to draw a picture of the times and of men, 

^See letter to Washington, in Witherspoon, Works, IX. 150. 
In his ** Essay on Money," Witherspoon held that the laws making 
paper a legal tender " are directly contrary to the first principles of 
commerce." Works, IX. 41. 

2 Webster, 129. 

*It was not until 1780, when the paper was worth only one or 
two cents on the dollar, that Congress advised the states to amend 
or repeal their tender laws. Journ. of Cong., March 20, 1780. 

* General Greene wrote that luxury and dissipation were very 
prevalent in Philadelphia, and called them ** the common offspring 
of sudden riches." Mr. Stone has written, "Philadelphia soon 
became the centre of speculation and of the pursuit of private gain." 
Fenn, Mag., III. 362, 376. In general, sec Greene, Hist. View, 
160; Belknap, 146-147 ; Breck, 28; Sumner, Financier, II. 136-137. 


from what I have seen, heard, and in part know,\ 
I should in one word say, that idleness, dissipation, | 
and extravagance seem to have laid fast hold of 1 
most of them ; that speculation, peculation, and an^ 
insatiable thirst for riches seem to have got the 
better of every other consideration, and almost 
every order of men ; . . . " ^ . The paper money 
opened the door to the most shameful frauds 
upon all who were so unfortunate as to be in the 
position of creditors. Dishonest debtors were 
enabled to pay their debts in worthless currency. / 
Witherspoon wrote, "For two or three years we • 
/constantly saw and were informed of creditors 
running away from their debtors, and the debtors 
pursuing them in triumph, and paying them with- 
out mercy.'* ^ Many persons lost a large part or the / 
whole of their fortunes.^ Guardians of trust funds 
were enabled to acquit themselves of their obliga- 

1 Sparks, Writings of Washington, VI. 151. 

* Witherspoon, Works, IX. 36. In Rhode Island, in 1786, 
stories were told of creditors " leaping from rear windows of their 
houses or hiding themselves in their attics," in order to escape 
debtors. Potter and Rider, 120. 

• McKean lost ;f 6ocx> by depreciation. Atner, Hist, Rev,, II. 99. 
William Livingston was worth ;^85f9 prior to the paper money era. 
He lost a large part of this by having debts paid in worthless paper. 
Sedgwick, 158. Richard Henry Lee found that, in 1779, he was 
receiving as rent for four thousand acres of good land a sum of 
money that would not purchase four barrels of corn. Lee, II. 45- 
46. Jefferson offered to repay a personal loan with currency depre- 
ciated to one-fourth of its nominal value. Some years later, how- 
ever, he caused payment to be made in full. Ford, Writings of 
Jefferson, IL 181-182. Jonathan Amory received for debts money 
worth only one-sixth of its nominal value. Weeden, 799. Cf. also 



tions by paying widows and orphans in paper that 
was worth only the smallest fraction of its nominal 
value.^ Pelatiah Webster could well say of this 
iniquitous currency that it had " polluted the equity 
of our laws ; turned them into engines of oppres- 
sion and wrong; corrupted the justice of our 
public administration; destroyed the fortunes of 
thousands who had most confidence in it;" and 
had gone far "to destroy the morality of our 
people." ^ Memories of those times were burned 
into the minds of all honest men who witnessed 

p. 803. The rich were often impoverished, while the poor acquired 
sudden riches. Wells, III. 75. In 1786, the superior court of 
Rhode Island heard twenty bills in equity brought by people who 
sought to discharge mortgages with worthless paper. The legal 
tender bills were brought into the court by the sackful. Bates, 144. 
Mr. Breck, who took the most favorable view possible concerning 
the currency, wrote; "Old debts were paid when the paper money 
was more than seventy for one. Brothers defrauded brothers, 
children parents, and parents children. Widows, orphans, and 
others were paid for money lent in specie, with depreciated paper, 
which they were compelled to receive." Breck, 28. See, finally, 
BoUes, I. 179-180. 

1 In Philadelphia, a guardian invested the fortune of his ward in 
real estate at some time prior to the Revolution. In 1779, when 
seventeen paper dollars were worth only one in specie, he proposed 
to pay the principal of the estate in continental paper at its nominal 
value. Phillips, II. 158. Benjamin Greenleaf, judge of probate in 
Essex County, Mass., has left us a most interesting statement of the 
injustice wrought by a depreciated currency, in the settlement of 
estates. Q, /. E,, IX. 243-246. 

2 Webster, 175, 176. Mr. Breck has written: "The morals of 
the people were corrupted beyond anything that could have been 
believed, prior to the event. All ties of honor, blood, gratitude, 
humanity, and justice were dissolved." Breck, 28. 



them; and never during their lifetime did the 
national government again resort to such a villa- 
nous agency of fraud and corruption.^ 

For a long time Congress had refused to admit 
that depreciation had taken place, and had re- 
peatedly pledged the public honor, its sacred 
honor, and several other kinds of honor, that the 
currency would certainly be redeemed at its face 
value.^ Insinuations that the paper would be 
repudiated were indignantly rejected as " deroga- 
tory " to the honor of that body ; while, as late as 
September 13, 1779, Congress declared, in a public 
address: "A bankrupt faithless republic would 
be a novelty in the political world, and appear 
among respectable nations like a common prosti- 
tute among chaste and respectable matrons." We 
are, therefore, at no loss for forcible language in 
which to describe the action that was taken only 
six months after this solemn declaration was sent 
to the various states. On March 18, 1780, when 
one dollar of the paper was worth only one or two 
cents. Congress adopted a plan for redeeming it at 
one-fortieth of its nominal value.^ It may be true 

1 Of course the continental paper called forth many discussions 
of the subjects of money and credit. We have often referred to 
Witherspoon, Webster, and Paine. Various discussions may be 
found in the Amer. Mus,, II. 23-73. See also the references in 
Sumner, Financier, I. 79-80, 88-89. 

^Journ. of Cong., Dec. 26, 1775 ; Dec. 28, 1776; Nov. 22, 
1777; Dec. 29, 1778; Jan. 2, 1779; Jan. 13, 1779; Sept. 13, 


•Bolles, I. 135, 207; Sumner, Financier, I. 85-87; Bullock, 
136-138 J Journ. of Cong., March 18, 1780. 




that there was good reason for despau-ing of the 
ability of the Confederation ever to redeem the 
bills of credit at par ; and it is certain that such a 
course would not have repaired the losses that had 
been suffered by most of the original holders of 
the bills. Nevertheless the resolution of 1780 was 
just what Witherspoon called it, "The first and 
great deliberate breach of public faith *' and " an 
act of bankruptcy." ^ Congress probably justified 
its action, as Jefiferson did in 1786, by claiming 
that the " former ofifers to redeem this money at 
, par " were " relinquished by the general refusal to 
take but in progressive depreciation." ^ Yet this 
does not alter the simple fact that thirty-nine for- 
tieths of the paper was absolutely repudiated. 
Franklin might say, as he did in 1779, that "there 
is some advantage to the public in the depreciation, 
as large nominal values are more easily paid in 
taxes, and the debt by that means more easily 
extinguished." ^ But such a complacent view was 
merely indicative of a loose sense of moral obliga- 
tions. As a matter of fact, the credit of the 
United States received a shock from which it was 
slow to recover. 

Congress next proceeded to issue " bills of a new 
tenor," to the amount of about $4,ooo,cxx); but 
these quickly depreciated. They were exchanged, 
in 1790, for the new public stocks created when 

1 Witherspoon, Works, IX. 118,131. 

2 Ford, Writings of Jefiferson, IV. 154. 
• Works of Franklin, VI. 345. 

V 72 


tjie national cf ^bt was at length funded.^ The old i/ 
bills gradualiyr disappeared from circulation, and 
specie quickl* took their place.^ This was the end 
of the continf ntal paper currency, of which only a 
small part vfj^ funded, in 1790, at one cent on the 
dollar.^ Dr W Ramsay was pleased to write that 
the money ** gently fell asleep in the hands of its 
last possessors." Mr. White has very properly 
emended this by saying : " A truer figure of speech 
would be that it passed out of the world like a vic- 
tim of delirium tremens.*' * After the close of the 
war, the paper-money mania broke out once more 
in 1785 and 1786. This movement was most dis- 
tinctly an agitation carried on by and for the debtor 
classes of the country, and is thoroughly typical of 
the struggles of the inflationists of the colonial 
period.^ Seven of the states at this time emitted 
bills of credit,^ and in all of the others there was 

iBolles, I. 138-139, 141; Phillips, II. 170-172J Bullock, 137- 

138. / 

« Webster, 75; Writings of Jeflferson, IV. 154; Writings of ^ 
Madison, I. 48 ; Chastellux, II. 30. 

•Elliot, Fund. System, 12. Of the bills circulating in 1780, 
;|(i 19,400,000 were paid in by the states under the act of March 18, 
1780. State Papers, Finance, I. 54, 58-59. 

* Ramsay, II. 181 ; White, 146. 

•This paper-money movement of 1785 has been carefully studied 
by Libby, 50-69. Cf. Bancroft, VI. 167-176. 

•Rhode Island, New York, New Jersey, Pennsylvania, North 
Carolina, South Carolina, and Georgia. Bates, 1 18-148; Arnold, 
11.520-537; Potter and Rider, 117-132 ; Fernow, 342; Phillips, 
I. 34, 84, 85 ; Iredell, Laws, 551 ; Stat of S. C, IV. 712-713 ; 
Ramsay, II. 184-185 ; Stevens, II. 374. 



a strong party which favored such i policy.^ In 
Massachusetts, the agitation started ty the debtor 
classes resulted in Shays*s Rebellion, a nd order was 
not restored without considerable difficulty. Per- 
haps the baldest and most shamelejjs declaration 
ever issued during an agitation for||)aper money 
may be found in the following resolution, which 
^as adopted in the Hampshire county convention 
In 1 786: 2 "Voted, that this convention recom- 
mend to the several towns in this county that 
they instruct their representatives to use their 
influence in the next general court to have emitted 
a bank of paper money, subject to a depreciation^ 
making it a tender in all payments^ equal to silver 
and gold, to be issued in order to call in the com- 
monwealth's securities." The words that the 
writer has italicized are so startlingly clear as to 
render unnecessary all comment upon the villany 
of these precious proposals. 

But the experience of the country with a depre- 
ciating paper currency finally taught a lesson 
which proved effective, so far as the federal gov- 

1 In New Hampshire there was a long and stormy agitation. 
Belknap, III. 460-477 ; Coll. of N. H. Hist. Soc, III. 1 17-122. 
For the uprising of the paper-money party in Massachusetts, see 
Barry, III. 218-260; Weeden, 843-847. Even in conservative 
Connecticut a paper-money party existed. Bronson, 168-169. In 
Maryland there was a bitter struggle between the two branches of the 
legislature. Scharf, II. 539 ; Pamph. on Const., 33. In Delaware 
a similar contest occurred. Libby, 61-62. In Virginia, the oppo- 
sition of the great federalist statesmen crushed a determined 
movement in favor of paper money. Writings of Madison, I. 218, 
332 ; Libby, 66-67. * Quoted by Libby, 56. 



emment was concerned. In 1787, Madison could 
write ^ truthfully, "There has been no momentt 
since the peace, at which the federal assent WDuldl 
have been given to paper money," for the lead-| 
ing statesmen of the United States had become, 
almost without exception, stalwart opponents of a 
government paper currency .^ In the constitutional | 
convention there was an almost unanimous opposi- ^ 
tion to the proposal to allow either the states or / 
the general government to issue bills of credit./ 
By an overwhelming vote the states were prohiW 
ited from ever resorting to such an expedients 
Then, by a vote of nine states to two, the conven- 
tion decided to strike out of the Constitution the 
clause that conferred such a power upon the 
national legislature.* A majority of the delegates 
that discussed the subject made it clear that they 
intended to take away from Congress the power 
to issue legal tender paper, and that they believed 
that this purpose had been accomplished.^ The 

iEUiot,V. 108. 

* This is well shown by Bancroft, Plea for the Constitution. To 
take a single example, Washington, by 1 785, had learned fully the 
evils of paper money. Writings of Washington, XI, 51. Cf. Idem, 
X. 489. See the denunciation of bills of credit in the Federalist, 
295-296. * Elliot, I. 270-271. * Idem, I. 226, 245, 

* See the debates in the convention. Elliot, V. 434-435. See 
also the opinion of Mercer. Sparks, Morris, III. 321-322. This 
much is fully established by Bancroft, in his Plea for the Constitu- 
tion. Even Mr. Thayer, in defending the decision of the Supreme 
Court, admits that " in the debates of the convention, so far as we 
know anything about them, the majority of the speakers thought 
that they were prohibiting bills of credit and paper money." Harv, 



Supreme Court, however, in our own time, has 
managed to find a constitutional warrant for im- 
pressing upon paper a legal tender character.^ 
But the purpose of the framers of the Constitution 
was understood perfectly by the men who opposed 
ratification in 1788. The new plan of govern- 
ment was violently assailed on the ground that it 
forbade either Congress or the states to issue bills 
of credit.2 Recent investigations have shown that 
this was one of the leading causes of the antago- 
nism which the Constitution encountered. A de- 
tailed study of the votes taken in each state where 
it was proposed, in 1785 or 1786, to issue paper 
money, has proved that the inflationists and repu- 
diators of that period were the very men who op- 
posed ratification two years later.^ Almost with- 

Law Rev,, I. 79. This was evidently the opinion of George Tick- 
nor Curtis. Curtis, I. 524-527. Criticisms on this part of Mr, 
Bancroft's Plea are decidedly weak. E^, James, 64-68. 

^In 1870, the Court held that the law of 1862, making green- 
backs a legal tender, was unconstitutional. Shortly afterwards, 
the personnel of the Court having changed, the law was upheld as 
an exercise of the very indefinite " war powers" of the Constitution. 
In 1884, a law of 1878, directing the reissue of greenbacks, was 
declared constitutional even in times of peace. 8 Wallace, 603 ; 
12 Wallace, 457; no U. S. Reports, 421. Perhaps the ablest 
defence of the decisions is by Mr. Thayer, Harv, Law Rev., I. 
Bancroft's Plea is the best-known attack upon the decisions. This 
Plea called out a reply by McMurtrie. Mr. Justice Miller has 
defended the decisions. Miller, 135-144. J. Randolph Tucker 
has criticised the position of the Court. Tucker, I. 508-516. 

2 See Luther Martin's " Letter." Elliot, I. 369-370, 376. 

*This is shown conclusively by Libby. Cf. Hildreth, III. 466- 
467, 535, IV. 25, v. 415-416; Bates, Chaps. IV. and V, 



out exception, the sparsely settled districts elected 
representatives who voted to emit a depreciating 
currency and then refused to adopt the new Con- 
stitution. On the other hand, the richer and more 
populous localities uniformly opposed the first pol- 
icy and favored the second. The exceptions to this 
rule are all explained by particular circumstances 
of a local character; so that a map showing the 
geographical distribution of the vote upon the Con- 
stitution serves as a fair index of the population, 
wealth, and industry of the various sections of the 
thirteen original states. An examination of the 
letters that passed between the great leaders of 
the movement in favor of union shows that the 
antagonism of the paper-money party was both 
anticipated and actually encountered. Pickering 
wrote that, in New England, opposition would 
come " chiefly from the Shaysites and paper-money 
men."^ Madison informed Washington that all 
men who favored paper money and tender laws 
contended against ratification.^ Many similar cita- 
tions might be presented if space would permit.^ 
Among the leaders of the opposition, Symmes 
wrote to Osgood concerning the constitutional pro- 
hibition of bills of credit: "Here I suppose the 
principal weight of opposition will hang." * Luther 
Martin, in his letter to the Maryland legislature, 

1 Pickering, II. 358. « Elliot, V. 572. 

*Idem, v. 577; Hist. Mag,, XVI. 271 ; E^ys on Const., 176; 
Pamph. on Const., 243. 

* Hist ColL Essex Inst, IV. 214. 



made the most of arguments that were based upon 
the same grounds. In the American Museum may 
be found a set of satirical resolutions which pur- 
ported to come from the enemies of the Constitu- 
tion.^ One of these reads as follows : " Resolved, 
that as this constitution most arbitrarily and inhu- 
manly prohibits the emission of paper money, and 
other resources, by which the unfortunate debtor 
may throw off the discouraging burden of his obli- 
gations, it ought to be considered, as in fact it is, 
a system of tyranny and oppression, compelling 
citizens in many instances to do things extremely 
disagreeable, and contrary to their interest." The 
facts warrant the positive assertion that the last 
act of the inflationists of the eighteenth century 
was to antagonize most bitterly the only feasible 
plan for constructing a firm union of the thirteen 
feeble, selfish, jealous, and quarrelsome states. 

^ Amer, Mus,, III. S4-85. A somewhat similar piece of satire 
may be found in McMaster and Stone, 83. 




In 1792,^ Congress established a national coin- 
age system by providing for the concurrent circu- 
lation of standard gold and silver coins. The silver 
dollar was given pure contents of 371 J grains of 
fine metal, and the gold eagle was to contain 247J 
grains of pure gold.^ This established a coinage 
ratio of 15 grains of silver for one grain of gold. 
Such a rating was not far from the actual market 
values of the two metals at the time when the law 
was passed, but ^Iver soon cheapened and drove 
gold out of circulation ; so that our first coinage 
act resulted practically in silver monometallism.^ 

^Various plans and proposals for a coinage system bad been for- 
mulated during tbe Confederation. Some of these have been 
printed. See State Papers, Finance, I. 100-107; ^^P* Mon. Conf., 
417-453; Watson, 243-268. Cf. Sumner, Financier, II. 36-47. 

* U. S. Stat, I. 248. For this and subsequent laws relating to 
money, see Rep't Mon. Com., Appendix; Dunbar. The history of 
the 371 J grain silver dollar, recommended by Hamilton and adopted 
by Congress, has been correctly traced for the first time by Sumner, 
in Amer, Hist Rev.^ III. 607-619. On our coinage laws, see 
BoUes; Laughlin; Sumner, Currency; Upton; Watson; White; 
and Linderman. 

'Soetbeer, 130, gives 15.05 : i as the market ratio for 1791, and 
15.68: 1 as the ratio for 1800. From 1800 to 1 810, the average 
ratio was 15.61 : i. In 1819, the committee on coinage reported to 
the house of representatives that gold, being underrated, "can 
scarcely be considered as having formed a material part of our 



Concerning this earliest legislation, Daniel Web- 
ster could declare, with entire accuracy, that " the 
framers of the Constitution, and those who enacted 
the early statutes on this subject, were hard-money 
men ; they had felt, and therefore duly appreciated, 
the evils of a paper medium ; they therefore sed- 
ulously guarded the currency of the United States 
from debasement. The legal currency of the 
United States was gold and silver coin ; this was 
a subject in regard to which Congress had run 
into no folly." ^ 

But if the national government had, for the time, 
turned away from the paper-money policy, the 
) agitation for cheap currency did not die out in the 
various states. An opportunity for such a move- 
ment was found in the development of banks of 
. \ issue.2 The Bank of North America, established 

Y , money circulation for the last twenty-six years." State Papers, 
^^> Finance, III. 399. Benton states that gold disappeared "com- 

pletely and totally " about twenty years after the adoption of an 
erroneous ratio by the law of 1792. Benton, I. 442. Even Ameri- 
can silver coins were displaced by light-weight Spanish money, so 
that Jefferson ordered the suspension of the coinage of silver dol- 
lars after 1806. Watson, 73-74. 

^Annals of Cong., 14th Cong., 1st Sess., 109 1. In 1834, Ben- 
ton argued strenuously that " the government of the United States 
was intended to be a hard-money government" Benton, I. 436. 

*An extended bibliography on banking in the United States 
may be found in Sen. Ex. Doc, 38. To the books there mentioned 
may be added: Macleod, Diet, 169-195; T. P. Kettell, in Eighty 
Years, I. 198-21 1; White; Bryan; and Sumner, Banking. The 
book last mentioned is the leading work upon the subject, and is so 
comprehensive that the reader may be referred to it for information 
on all the subjects discussed in this chapter. 





in 1782, was the first institution in the United 
States that undertook to maintain a bank currency 
that should be at all times convertible into specie.^ 
In 1784, banks were founded in Boston and New 
York ; and before long a banking mania spread in 
all directions. In the Mississippi Valley, a bank 
was established in Kentucky as early as 1802 ; 
while, in 181 3, Missouri was provided with a simi- 
lar institution. In 1791, the first Bank of the 
United States was founded, and began to issue 
circulating notes that formed a uniform and con- 
venient paper currency throughout the country, a 
function that was continued by its successor.^ 

But there were in the country only a few men 
who had any adequate comprehension of the true 
nature and the proper methods of banking. The 
common view seemed to be that a bank was a mys- 
terious and magical means of creating wealth out 
of nothing; and it was supposed that, since a 
banker secures interest on his notes, the banking 
business offered a unique and beautiful opportu- 
nity to secure interest on one's debts. Banks were 
often formed for the sole purpose of issuing their 
paper ; and the privilege of emitting such promis- 
sory notes, which were intended to circulate as 
currency, was claimed as a common law right.^ It 

* Lewis; Sumner, Financier, II. 21-35. 

^On the banks of the United States, see Clarke and Hall; 
BoUes, II. 127-155, 317-358; Benton; Kinley; Sumner, Jackson; 
articles by Root and White, in Sound Currency ^ IV.; /, P, E^ 

V. 421-457. 


G 81 



was with reason that Hugh Williamson complained, 
in i8 12, that the constitutional prohibition of the 
issue of bills of credit by the states might be prac- 
tically nullified " by a deluge of bank paper." ^ The 
people of the United States had embarked once 
more on the enterprise of substituting a cheaper 

edium, paper, for gold and silver, which they 
regarded as "dead stock," to use Hamilton's 
phrase ; ^ and soon the issue of bank notes came 
to be regarded as the only method of providing 
the country with enough money to meet the needs 
of industry.^ 

In all parts of the country many of the earliest 
banks were conducted with extreme recklessness 
or utter dishonesty. In New England, the first 
crash came in 1809, and this was followed by the 
enactment of more stringent laws regulating the 
business. In 181 4, 1837, ^.nd 1857, there occurred 
general suspensions of specie payments by most 
of the banks in the United States ; while periods 
of suspension in particular localities were even 
more common. Only the New England banks 
withstood the first of these crashes, and a still 
smaller number maintained the convertibility of 
their notes during the crises of 1837 ^^^ 1857. 
During some parts of its existence, the second 

1 Williamson, II. 40-41. 

^ State Papers, Finance, I. 67. See Sumner's comments. Sum- 
ner, Banking, 24-25. 

• Note the manner in which Gouge combated this view. Gouge, 
Part I. 45, 64-67, 1 1 7-1 23. See also quotations in Sumner, Bank- 
ing, 25. 



Bank of the United States exercised a restraining 
influence upon the issues of the state banks, since 
it could refuse to receive in payment of public dues 
the currency of any institution that did not main- 
tain the convertibility of its notes.^ Indeed, it was 
in part a demand for a national bank that should 
regulate the disordered paper medium of the coun- 
try that induced Congress to grant the charter in 
1816. But this wholesome restraint was often 
denounced as oppression and intimidation of the 
state banks, and it helped to produce in some 
localities a lasting hostility against the federal 

At the present day, the abuses perpetrated by 
the state banks during the first half of the century 
may appear almost incredible. The capital of 
many institutions was only partially paid in, and 
stockholders frequently proceeded to borrow all 
that they had contributed.^ Loans were made 
upon mortgage security, while it seemed impossi- 
ble for the disastrous results that commonly fol- 
lowed such a policy to teach the obvious lesson 
that an institution that attempts to support a large 
amount of demand liabilities must invest its funds 
only in quick assets.^ Notes were issued in such 

iQarke and Hall, 749-750; Gallatin, II. 461, III. 334, 336; 
Sumner, Banking, 72, 79, 109, 113, 166, 208. 

2 Gouge, 46-47 ; Raguet, 1 15-1 19, 145; Tucker, Money, 194, 
365 ; Rep't Compt. Currency, 1876, XXXIII. ; Felch, 80. 

'Hamilton, in 1790, had argued forcibly that land is "an unfit 
fund for a bank circulation." State Papers, Finance, I. 73. But 
in 1839, Condy Raguet expressed the belief that a bank should 



small denominations as one shilling, or even five 
cents, in the expectation that it would never be 
worth any one's while to collect such infinitesimal 
currency and present it for redemption.^ One 
notorious bank, which broke down in 1809, was 
found to have ^[580,000 of notes in circulation, and 
$86.46 in its specie reserve.* Banks were located 
in inaccessible places, " on some bottomless prairie 
road," or in the depths of forests, where it would 
prove as difficult as possible to find the " offices " 
at which the notes were payable.^ When a Boston 
bank seijt a batch of currency to New York for 
redemption, the collector of the port seized the 
bills upon the pretext of preventing a run on the 
New York banks.* A messenger sent to South 

invest its capita/ in mortgages, since " the security of real estate ** 
is safer than that of promissory notes. Raguet, 90. Mr. McCulloch 
telb us that the famous and conservative State Bank of Indiana, at 
the outset of its career, loaned very largely to men who were buying 
or improving lands. But the crisis of 1837 taught the managers 
that these loans were ** sluggish and unreliable/' so that, after that 
time, the loans were " mainly confined to bills of exchange " based 
upon produce shipped to Eastern or Southern markets. McCulloch, 
Men and Meas., 116. 

1 See especially Raguet, 135-140, on the circulation of bank 
notes of small denominations. 

^ Gouge, 45-50. This was not much worse than many other 
occurrences. In 1837, ^ Massachusetts bank failed, with ^111,000 
of notes outstanding, and ^36.71 of cash on hand. Root, in Sound 
Currency, II. 258. 

8 G)oley, 268-269 ; Garnett, in Sound Currency, V. 142 ; 
Hadden, 186-187 ; Rep't Compt Currency, 1876, XXXV.-XXXVI.; 
BanJi Mag., XIII. 235. 

* Felt, 218. 



Royalston to demand the payment of j^ 10,000 in 
notes issued by the local bank, was arrested upon 
a frivolous charge in order to avoid such a request.^ 
JNothing was more common than a state of public 
* opinion which condemned every attempt to obtain 
specie from the banks. To ask one of these 
institutions to fulfil the promise printed on the 
face of its bills was a disgraceful act, which 
indicated a lack of public spirit, or was proof 
positive of a desire to start a "run."^ In Ohio, 
Indiana, and Missouri, between 1855 and 1859, 
certain persons who presented notes for redemp- 
tion were threatened with lynching or a coat of 
tar and feathers.^ Some states established public 
institutions that were no better than the loan banks 
of colonial days. These were designed to do a 
banking business "upon the faith and credit" of 
the states^ and to supply the people with paper 
money.* IfThus, in 1820, the Bank of the Common- 
wealth of Kentucky was instituted. The legisla- 

1 Whitney, Suffolk Bank, 60. 

* In Richmond a man who took legal measures to compel the 
payment of notes was subsequently sued for damages by the bank. 
Gouge, 84. Persons seeking the redemption of bills issued by the 
bank of Darien were obliged to swear, before a justice of the peace, 
to the ownership of each and every bill. Idem, 141. Raguet 
devotes a chapter to this subject. See also State Papers, Finance, 
III. 394-395 ; White, 365. 

•Bank Mag., X. 41, XII. 587, XIV. 323. 

* Gouge, 131-133, 138; Conant, 330-337 J Root» i" Sound 
Currency, II. 221-252 ; Sumner, Banking, Index, " Banks of the 
States.'' In some cases state bonds were issued in order to raise 
capital, and repudiation allowed. Scott, 33-48. 



ture appropriated JS7000 in order to purchase 
books, paper, and the plates for printing bills ; 
then i!2,cxx),ooo of paper was issued, and appor- 
tioned among the counties to be loaned out on 
mortgage security. This was practically an emis- 
sion of state bills of credit, which was prohibited 
by the Federal Constitution; but, in 1835, the Su- 
preme Court, which had recently been " Jackson- 
ized," found a way of arriving at the conclusion 
that the act creating the bank was constitutional.^ 
Judge Story vigorously dissented from this opinion. 
The consequence of the spread of this mania for 
unsound banking was that from i8(X) to i860, an 
inconvertible paper currency continued to vex the 
United States. Bank notes were often at a dis- 
count of fifty or sixty per cent,^ and the issues be- 
came so large as repeatedly to cause inflation. 
Then a period of liquidation would ensue, and 
prices would fall to extremely low levels.^ In 

18 Peters, 118; 11 Peters, 257. This case was first heard in 
1834, and three judges out of five held that the notes were in 
reality bUb of credit. But, as two judges were absent, the case 
was heard again a year later. Meanwhile Chief Justice Marshall 
had died, and two other vacancies had occurred ; so that now five 
out of the seven judges were appointees of President Jackson. 
Story stated in his dissenting opinion, at the final hearing, that 
Marshall, at the first hearing, had decided that the notes of the 
Bank of Kentucky were bills of credit. 1 1 Peters, 348. Cf. Sum- 
ner, Banking, 142-143. 

* Some statistics of depreciation may be found in Gouge, 132- 
133, 135, 166-168; Gallatin, III. 363; Sumner, Banking, Index, 
" Depreciation.** 

* Gouge discusses intelligently these alternate periods of inflation 



these periods of depression the favorite remedies 
suggested were more money or a higher protective 
tariff.^ Men who had speculated on a , rising 
market, and had been caught "long" when the 
reaction commenced, would cry out loudly for 
more currency in order that prices might be 
sustained until it should be possible to unload 
upon other people. Prodigality and dishonesty 
always attended every era of inflation; and 
when the false prosperity ^ thus created had 
collapsed, debtors began to clamor for legislative 
relief. In many states arbitrary stays of execu- 
tion were granted, and unfair appraisement laws 

and liquidation. Gouge, 1 10-126, 174-176. Raguet and Tucker 
also describe the process. Raguet, 142-148 ; Tucker, Money, 
18^-190. See also Gallatin, III. 365-488. Sumner makes his 
chapters follow this sequence of events : inflation, crisis, liquidation. 

^In the hard times just prior to 1830, there was laid before the 
Senate a proposal for the issue of 1^50,000,000 of government paper. 
Snch an addition to the currency, it was claimed, would make 
property " rise two thousand millions of dollars " and would restore 
prosperity. See Gallatin, III, 255. In the depression of 1840, the 
Pennsylvania ** relief" system was authorized. This was intended 
to relieve the situation through the issue, by the banks, of ^^3,000,000 
of notes redeemable in state bonds. See Gallatin, III. 409-412. 
The hard tunes succeeding the period of inflation that ended in 
1 81 8 had much to do with the agitation for higher duties on 
imports. See Clay's speech of 1824 and Webster's reply, in 
Taussig, Papers, 254-256, 324-326. Gouge appreciated this fact 
very well. Gouge, 125, 153. Cf. Taussig, Tariff Hist., 19-21, 
68-69 ; Sumner, Protection, 39, 41. 

3 See the picture of the inflation period of 1 81 6, in Gouge, 64-72. 
Matthew Carey called this the " golden age " of Philadelphia, and 
insisted that the prosperity was not artificial. Gouge, 71-72. 



or replevin acts were passed.^ In the period from 
1820 to 1825, Kentucky succeeded in making things 
especially lively for the hated "money power."* 
Says Professor Sumner : " Under the replevin law, 
the judges instructed the jury to find * scaling 
verdicts/ rating the judgment sum in specie 
according to the depreciation at the time of the 
contract. This sum could be collected after two 
years, unless the creditor indorsed the execution. 
If he did that, he obtained payment in three 
months in paper worth about fifty cents on the 
dollar, — that is, he obtained about one-fourth of 
his original claim." This, according to the gov- 
ernor of Kentucky, was "the paramount law 
of necessity." Before long, the state had two 
rival courts of appeals contending for " paramount" 
jurisdiction, while the legislature was rent by the 
efforts of the debtor party to secure the enact- 
ment of still more "paramount" laws. In 1820, 
a committee of the Pennsylvania legislature de- 
picted the results of the issues of inconvertible 
currency in the following words: "In conse- 
quence of this most destructive measure the 
inclination of a large part of the people, created 
by past prosperity, to live by speculation and not 
by labor, was greatly increased; a spirit in all 
respects akin to gambling prevailed; a fictitious 
value was given to all descriptions of property ; 
specie was driven from circulation, as if by com- 

1 Gouge, 131, 135 ; Sumner, Banking, Index, "Stay laws." 
•Sumner, Bankii^, 1 21-137; Shaler, 173-185; Gouge, 131-132. 


mon consent, and all efforts to restore society to 
its natural condition were treated with undisguised 
contempt."^ Six years later the governor of 
Connecticut wrote: "It is amidst explosions of 
credit, principally occasioned by the conduct 
of Banks, that every class of industrious citizens, 
and all our enterprising young men, are exposed 
to repeated losses, against which no vigilance can 
guard, and no prudence exempt them." ^ 

The growth of the banking mania was neces- 
sarily attended with a renewal of the old com- 
plaints and discussions concerning monetary 
affairs. In the Mississippi Valley the cry was 
heard that trade with the Eastern states drew off 
all the specie,^ and this, too, in spite of the fact 
that large amounts of silver came into this region 
from New Orleans. The use of inconvertible bank 
notes would merely accelerate the export of specie ; 
but the cheaper medium was often welcomed as a 
remedy for the alleged scarcity of hard money. 
When, in 1814, the general suspension of specie 
payments brought the country down to the basis 
of a depreciated paper currency, it was vigorously 
denied that the premium upon silver was proof of 
the depreciation of the inconvertible bank notes. 
In Philadelphia, Franklin had worthy successors 
who began to publish pamphlets refuting the 
" very fallacious and mischievous doctrines," that 
" the ability of a Bank to redeem, i,e, to pay specie, 
is the true criterion of excessive issues " ; that " a 

1 Gouge, 1 20-1 21. ^Idtm, 161. 'BuUer, 295. 



paper currency is depreciated when it ceases to be 
of equal value with gold and silver '* ; and that " the 
rise of specie, and a general increase of prices, 
are the certain indications of depreciation." ^ One 
Philadelphia pamphleteer declared: "The paper 
of the Bank of England preserves a value, as 
steady perhaps as any attainable, whilst the pre- 
cious metals, like other commodities, fluctuate 
around this standard."^ This scientist proposed 
the creation of a national bank which should issue 
circulating, legal tender notes redeemable in United 
States stocks. To perfect this scheme, he desired 
that the notes of state banks should be payable in 
those issued by the national bank. Matthew Carey 
pronounced this a " magnificent *' idea, and " a sov- 
ereign remedy for all the financial difficulties of the 
country."^ In 1819, the president and directors 
of the Bank of South Carolina submitted to the 
state legislature a franker plea for inconvertible 
paper money. The South Carolina address raises 
the query whether a sufficient metallic medium is 
not unobtainable, and whether it would not be bet- 
ter to dispense entirely with the use of gold and 
silver. Then it proceeds to recommend that the 
government should issue all money to the people, 
since government alone can adjust the amount of 
currency to the needs of trade. Finally it abuses 
the Bank of the United States for presenting for 
redemption state bank notes received in payment 
of the federal revenues.* 

1 Gouge, 70. ^Bollman. 'Gouge, 76. */d5p»f, 143. 


The condition of the bank currency, however, 
was not equally bad in all sections of the country. 
As time wore on and the lessons of sad experience 
were learned, better methods of banking were 
developed in the older states. The New England 
banks, led in this direction after the disaster of 
1809. The city banks compelled those located in 
the country districts to maintain the convertibility 
of their notes, and wise legal restrictions gradually 
were perfected.^ By i860, Massachusetts had 
developed one of the best banking systems in the 
world. In New York, the safety fund and the 
bond security systems had been slowly perfected, 
and honest management was the rule ; yet, in 1861, 
the Bankers' Magazine described some of the coun- 
try banks as mushroom concerns.^ Louisiana had 
passed a model banking law in 1842, under which 

1 Whitney, SufiFolk Bank ; Sound Currency, II. 276-284. The 
most important restrictions were, briefly, as follows : (i) Banks 
most have a certain amount of paid-up capital, and must not 
impair this by loans on pledges of their own stock. (2) Small 
notes were prohibited. (3) The note issues should not exceed a 
certain amount, as twice the paid-up stock. (4) Noteholders 
were given a prior lien on assets of the banks. (5) Banks were 
forbidden to reissue the notes of other banks. (6) A certain 
minimum reserve was required. (7) Directors were made specially 
liable, and a double liability was imposed upon shareholders. 
(8) Public statements of accounts were required, and examiners 
were appointed to investigate the condition of the banks. (9) Deal- 
ing in shares of other banks or in merchandise was forbidden, 
and lending on mortgage security was sometimes prohibited. For 
an early discussion of methods of legal regulation see Tucker, 
Money, 191-232. 




her banks were, in i860, the safest in the country 
in many respects.^ In other states individual bank- 
ing institutions had become justly celebrated for 
the ability and honesty of their administration. 
The reader will at once call to mind the State 
Banks of Indiana and Ohio, the Bank of the 
State of South Carolina, and the banking house 
of George Smith and Alexander Mitchell in Wis- 
consin.2 But such distinguished exceptions merely 
serve to heighten the contrast presented by most 
of the banking institutions in the South and West. 
In the Upper Mississippi Valley the conditions 
remained particularly bad in i860. Attempts had 
been made to adopt the provisions of the banking 
codes of other states, but the laws thus framed 
had been badly administered. North of Louisiana 
and Arkansas, there was practically no convertible 
bank money in the Mississippi Valley; and the 
notes of dead or doubtful banks were hawked 
about at from ten to ninety per cent discount.' 
In 1859, a bogus Ohio bank had started in busi- 
ness by investing $165 in a plate, and paying one 
quarter of a cent on a dollar for having its notes 
printed. It had then established its credit firmly 
by giving $1900 to the publisher of a bank note 

1 Sumner, Banking, 387-391, 434-437. Note what McColloch 
says of the honorable action of the New Orleans banks in 1 861. 
McCulloch, Men and Meas., 138-139. 

«See/. P, E,,\V, 1-36 ; McCulloch, Men and Meas., 1 13-138 ; 
White, 374-394 ; Sound Currency, V. 1 14-120, 314-328 ; Sumner, 
Banking, 439-442 ; Rep*t Compt. Currency, 1876, XXVI.-XXVIII. 

^Bank Mag., XII. 166, XIV. 152, 811-814, XVII. 396, 1002. 


detector, who agreed to " quote the money right." ^ 
" Quis ctistodiet ipsos custodesf This incident 
reminds us that note and counterfeit detectors 
were in universal use by all who would avoid loss 
from the receipt of bogus bank notes and the 
notes of bogus banks.^ From the best data obtain- 
able, it has been computed that, in i860, the specie 
held by the banks of Illinois amounted to only 
4.25 per cent of the circulation and deposits. In 
New York and Massachusetts, the specie reseryee^ 
amounted, respectively, to 20.39 per cent and 21.63 
per cent ; while, in Louisiana, the percentage rose 
as high as 52.46.^ 

^BankMag.,XlV. 153. 

' White, 397-404 ; Sumner, Banking, 455. 

•Bank Mag,, XIV. 2P, 





In the last chapter it was shown that the 
coinage legislation of 1792 resulted in an under- 
valuation of gold, and the establishment of silver 
monometallism. As early as 18 18, there began a 
movement in favor of such a change in the ratio 
of the two metals as would bring gold back into 
circulation.^ In 1834 and 1837, the coinage laws 
of the United States were finally amended so as to 
accomplish this result At that time the market 
ratio of silver to gold was about 15.8 : i ; but Con- 
gress adopted a rating of 16 : i, with the evident 
intention of establishing in practice the single gold 
standard.* Unfortunately, the acts passed in 1834 
and 1837 reduced the fine contents of the gold 
eagle froYn 247.5 grains first to 232 grains and 
then to 232.2 grains. Just before this change, the 

^See documents reprinted in Rep't Mon. Conf., 502-697. 
Gouge, Part I. 109, proposed to strike gold coins on whose face the 
pure contents should be stamped. These would not need to be 
made a legal tender, and could be used in all large payments. 
Benton, chaps. 105 and 108, is an important reference on this sub- 
ject. Gallatin advocated a change of the mint ratio to 15.6 : !• 
Gallatin, III. 309. See also Raguet, 204-250. 

au. S. Stat., IV. 696, v. 136. See Laughlin, 52-91; Soetbccr, 
131. In 1840, the market ratio was 15.62 : 1. 



gold dollar had been worth a few cents more than 
the silver dollar, which was the actual standard of 
value. But this reduction in the weight of the 
eagle produced a gold dollar that was about two 
cents less valuable than the silver dollar.^ Thus 
Congress robbed creditors of two per cent of the 
value of existing debts, and established a prece- 
dent that was fraught with danger for the future. 
It was predicted that this action would enable 
gold to replace silver as the actual medium of 
exchange ; ^ and this result was gradually brought 
about, especially after the great gold discoveries of 
1849 caused a marked decline in the value of the 
yellow metal. By 1853, the silver dollar was worth 
J! 1. 04 in gold, and had become an obsolete coin ; ^ 

lAt the ratio of 15.73: i, which Soetbeer gives for the year 
1834, the gold dollar of 23.2 grains established by the act of that 
year would have been worth slightly more than ninety-eight per cent 
of the 371 .25 grain silver dollar. In subsequent years the ratio some- 
times rose to 15.8 or 15.9 to I, and this change in the value of the 
gold dollar made it worth about ninety-nine per cent of the value of 
the old silver dollar. Cf. the tables given by Linderman, 161-162. 

^The committee that reported in 1834 made such a prophecy. 
H. Rep., 278, p. 56. Raguet, 210-212, 247, predicted the same 
ultimate result 

* This displacement of silver was a very gradual process prior to 
1850. In 1839, Raguet, 208-209, said that little progress had been 
made in this direction. McCuUoch says that the specie currency 
of the West was composed almost exclusively of silver until the dis- 
covery of gold in California. McCulloch, Men and Meas., 119. 
In 1850, the ratio of the two metals in Europe was 15.7: i> 
about the same as it had been in 1834. But by 1853, it had 
changed to 15.33:1. Soetbeer, 131. In this year even our 
fractional silver disappeared from circulation, and Congress had 



while the product of the Califomian mines sup- 
plied the country with an abundant gold circula- 
tion. In 1 86 1, it was estimated that the currency of 
the United States consisted of about $2So,cxx),ooo 
of specie and $202,ooo,cxx) of bank notes. 

Soon after the opening of the Civil War,^ the 
government negotiated a loan of $iSo,cxx),cxx) from 
the banks in the leading Eastern cities. Congress 
wisely gave Secretary Chase permission to keep 
this money in solvent banks, and to draw upon 
these funds by check as fast as should be neces- 
sary. But the Secretary foolishly refused to fol- 
low such a course, and withdrew from the banks 
a large portion of their reserves, — an action which 
was soon followed by a general suspension of 
specie payments by the banks throughout the 
country.^ At the opening of 1862, the credit of 
the United States was not sufficiently high to 
enable the government to dispose of its six per 
cent bonds at their par value; and the authori- 
ties at Washington objected to selling the public 
securities for what they would bring in the market. 
Under these circumstances, Congress finally de- 

to establish a debased subsidiary coinage. U. S. Stat., X. 160. 
At this time it was explicitly recognized in the debates in Congress 
that the United States had practically but a single standard of value, 
and that gold. Cong. Globe, XXVI. 629, Appendix, 192. 

^On this period of our finances, see Bolles, III.; von Hock; 
Taussig, in Shaler's United States, II. 537-544. 

a/. P. E,y VII. 289-326; Sumner, Banking, 45S-461; Rep't 
Mon. Com., 402-404; White, 149-152. Even Spaulding, 1^4, 
criticises this action of the Secretary. 



cided, against the emphatic protests of many of 
its ablest members, to issue $i5o,ooo,(XX) of notes 
that were declared to be legal tender in all pay- 
ments, except for customs duties and interest on 
the national debt.^ Other issues were subsequently 
authorized, so that finally i!4So,ocx),cxx) of irredeem- 
able paper was placed in circulation. In 1864, 
the limit of the permanent issues was placed at 
J!400,ooo,cxx) ; and the favorable turn of both mili- 
tary and financial operations enabled the govern- 
ment to adhere to its promise.* 

As is well known, the greenbacks depreciated, 
and the country was again involved in all the evils 
of a fluctuating paper medium. The bills were 
injected into a currency that already contained 
more than $200,(XX),ooo of bank notes that had 
ceased to be redeemable in specie,^ while the situa- 
tion was made worse by the issue of interest-bear- 
ing, legal tender paper.* Before the end of 1862, 

^U. S. Stat., XII. 345. Mr. Spaulding, who claimed to be the 
father of the greenbacks, discussed their history in his Legal Ten- 
der Paper. He was well criticised by Walker and Adams, in 
N, A, R.f April, 1870. On the greenbacks, see Newcomb; Bowen, 
347-367; Sumner, Currency, 189-227; Walker, 369-375; Knox, 
80-147; White, 148-165, 191-197; Noyes, 1-72; Rep*t Mon. 
Com., 389-490. 

«U. S. Stat, XII. 532, 710, 822, XIII. 219. 

* Of the issues of the state banks in 1 86 1, probably 1 150,000,000 
was in the North. After the suspension of specie payments these 
issues increased to 1 183,000,000 in 1862, and ^238,000,000 the fol- 
lowing year. After 1863, the notes of the national banks began to 
replace these issues. Rep. Sec. Treas., 1897, CXXXI.-CXXXVIIL 

^In 1861 and 1862, Congress authorized the issue of j((6o,ooo^ooo 
H 97 


gold was selling for $1.34 in currency; and, during 
the year 1864, the greenbacks showed an avetage 
depreciation of more than fifty per cent.^ The 
government did not avoid the necessity of selling 
its bonds for what they would command in the 
open market, and was obliged to create a nominal 
debt of $2,565,000,000, for which it received not 
more than $1,695,000,000 in gold. When all ele- 
ments are taken into consideration, it seems certain 
that, before the close of the war, the " paper-money 
plan of finance '* had cost the United States an un- 

of demand notes not bearing interest, but receivable for public 
dues and finally made a legal tender. U. S. Stat, XII. 259, 313, 
338. These were exchanged for greenbacks. For their history, 
see Breckenridge, in Sound Currency, V.; Tenth Census, VII. 
372. In 1863, interest-bearing notes, running for not more than 
three years and a legal tender for debts, were issued to the amount 
of 1211,000,000. U. S. Stat, XII. 710; Tenth Census, VII. 377- 
378. In 1863 and 1864, "compound interest notes" were issued 
to the amount of 1^266,594,000. These were a legal tender, and 
^177,045,000 of the issue replaced the notes mentioned above. 
U. S. Stat., XII. 710, XIII. 218; Tenth Census, VII. 378. These 
notes entered into circulation to a greater or less extent, and 
were periodically hoarded as the time for interest payments ap- 

^ From the suspension of specie pa3rments by the banks to the 
time of the issue of greenbacks, the premium on gold was only two 
or three per cent. By July, the average value of |ioo of green- 
backs had fallen to $&6,6o, and the following January it was only 
^68.90. During the year 1863, the average gold value of the 
greenbacks was 1^68.90, the value of the paper remaining nearly 
stationary. Then in 1864, it sank to an average value of ^9.20. 
The highest price ever paid in currency for one dollar in gold was 
1(2.85. Tables of depreciation may be found in Knox, 97; Muhle- 
man, 29 ; Rep. Mon. Com., 562. 



necessary expense of more than $500,000,000.^ In 
other respects the experiment with the greenbacks 
proved equally costly. Wages did not rise imme- 
diately in proportion to the increase of prices,* so 
that the laboring classes suffered a considerable 
loss in their real incomes.^ Business was given 
an unhealthy, speculative impulse, which necessi- 
tated a severe period of liquidation in 1873. A 
dishonest medium of exchange was productive of 
the most notorious extravagance and corruption, 
which gave to the decade following the close of 
the war a character that was perhaps more un- 
savory than that of any epoch since the adoption 
of the Constitution. James Fisk and Jay Gould, the 
CrMit Mobilier scandals and the Belmont impeach- 
ment trial, were the natural products of this period 
of reckless inflation. 

In 1866, Secretary McCuUoch was authorized to 
retire a certain amount of the greenbacks each 
month ; but this necessary and wholesome policy 
of contraction was opposed by all who had invested 
while prices were still rising, and desired an oppor- 
tunity to unload their investments upon other peo- 
ple. Accordingly, when the greenbacks had been 
reduced to $356,000,000, Congress prohibited the 
further retirement of the notes.^ Meanwhile, the 

1 Adams, 131 ; Rep. Mon. Com., 445-461 ; /. P, E.^ V. 1 17-156. 

* Rep. Mon. Com., 470-479. 

•U. S. Stat, XIV. 32, XV. 34. On contraction, see McCulloch, 
Men and Meas., 210-213 ; Noyes, 7-16. According to the law of 
1862, the greenbacks had been convertible into six per cent bonds, 
but this provision was repealed in 1863. U. S. Stat., XII. 711, 



proposal was made to redeem with the paper 
money a portion of the bonded debt of the United 
States. When the 5-20 bonds were authorized in 
1862, the pledge was made that interest should be 
paid in coin, but nothing had been said concerning 
the principal. This oversight was corrected in the 
issues of bonds authorized in 1863 ;^ but the claim 
was made that the obligations created under the 
act of 1862 were lawfully redeemable in green- 
backs, since the government had promised to pay 
only the interest in specie. The Democratic plat- 
form of 1868 advocated the payment of the princi- 
pal of the 5-20 bonds in depreciated paper,^ but this 
plank was practically repudiated by the candidate of 
that party. The defeat of the Democrats was f ol- 

^ U. S. Stat., XII. 345-346. The law of 1862 did not specify in 
what money the bonds should be repaid, since no greenbacks had 
been issued at the time when it was enacted, and there seemed to be 
no occasion for a specific declaration. Another section of the law 
provided for the issue of greenbacks and specified that they should 
not be a legal tender for the interest on the debt. The bonds 
issued in 1863 were specifically made payable in coin. U. S. Stat., 
XH. 710. 

^Ann. Cyc, 1868, p. 747. President Johnson recommended 
that the interest on the bonds should be applied to the payment of 
the principal until that should be extinguished. Many Republicans 
believed that the 5-20 bonds of 1862 should be paid in greenbacks ; 
even John Sherman advocated such action in 1868. Cong. Globe, 
40th Cong., 2d Sess., V., Appendix, 181. Cf. speech of Thaddeus 
Stevens. IcUm^ 41 7^. In 1868, the Republican convention of 
Indiana wanted to have these bonds " honestly " paid in greenbacks, 
except where coin was specified ; and desired to have this done in 
such a manner as to make the money in circulation equal to the 
wants of the country, but without " too great an inflation of the 
currtncy!^ Ann. Cyc, 1868, 378. 


lowed by a resolution of Congress pledging the 
country to redeem all its bonded debt in coin, and 
promising to adopt the same policy with respect 
to the greenbacks.^ But many people still insisted 
that " the bondholders should be paid in the same 
currency that had been given to the soldiers/' as 
if two wrongs could make a right ; while, in some 
quarters, threats were heard that the debt would 
be repudiated if Congress refused to redeem it with 
depreciated paper.^ 

All the conditions that prevailed in 1868 contrib- 
uted to the growth of a strong sentiment in favor 
of the retention of the greenbacks as a permanent 
feature of our monetary system. The creation of 
the national banking system during the war had 
resulted in a prohibitory tax of ten per cent upon 
the notes of state banks.^ Since the continuation 
of " wildcat ** bank issues was no longer possible, 
it was evident that the withdrawal of the green- 
backs, and the restoration of the gold standard, 
would leave the country, for the first time in its 
history, without any form of cheap currency. It 
was not strange, therefore, that in many sections 
there should be manifested a violent opposition to 
parting with the only form of irredeemable paper 
that remained available. Besides this, as has been 
noted, many persons had made extensive invest- 
ments during the period of inflated prices, and 

lU.S. Stat, XVI. I. 

^See Democratic platform in Ohio in 1869. Howard, 91. 

•U.S. Stat., XIII. 484. 



would naturally oppose the restoration of the cur- 
rency to a specie basis. These were the causes 
that led to the passage of the act of 1868 prohibit- 
ing the further retirement of the greenbacks. 

As a matter of course, some people began to 
deny that there had been any real inflation of the 
currency on account of the issue of the greenbacks. 
In December, 1862, when the premium on gold 
ranged sometimes as high as thirty-four per cent, 
Secretary Chase, in his Annual Report, expressed 
a doubt whether this was due to an excessive issue 
of paper. In the following January, it was often 
contended in Congress, that the paper currency 
had not depreciated; that King Gold had been 
" degraded to a commodity of traffic, like com and 
wine and pork,*' so that its value was subject to 
** all the fluctuations of supply and demand " ; and 
that the greenback commanded the same quantity 
of commodities that it formerly did, so that the 
premium on gold did not indicate a depreciation of 
the paper.^ A year later, a writer in the NortA 
American Review contended that it was " the duty 
and the prerogative of a government to supply a 
^ currency to the people," and that the greenbacks 
were " the best currency that ever a nation had," 
" such a currency as was never dreamed of in the 
philosophy of the framers of the Constitution."^ 

iCong. Globe, 37th Cong., 3d Sess., 383, 386, 391, 409. 

^N, A, JP., XCIX. 210, 227. Hon. W. D. KeUey stated in 
1876 that this article was by his ''late townsman and friend/' 
Sydney George Fisher. Cong. Globe, 44th Cong., 1st Sess., 11 73. 



Then Henry C. Carey expressed the belief that it 
was the wicked free-traders who attributed the 
high price of gold to the greenbacks, which had 
in reality " fallen on the country as the dew falls.** 
He considered paper money "democratic in its 
tendencies '* and wanted i!200,ocx),cxx) more of it, 
for he denied that any " plethora of money *' 
existed. The changes in prices that had occurred 
since 1862 were such as must have taken place 
" had the idea of a legal tender note had no exist- 
ence.** He desired the retention of "a national 
system of circulation based entirely on the credit 
of the government with the people and not liable 
to interference from abroad.** ^ Some years later, 
the echoing voice of Henry Carey Baird was raised ^ 
in favor of a national paper currency interchange- 
able with government bonds. Mr. Benjamin Butler 
desired an " American system of finance,** based 
upon a dollar, "of some convenient and cheap 
material,*' which should have " a certain fixed and 
stable value,** and should no more be redeemable 
than a yardstick or a quart measure. This "Amer- 
ican " currency, which should be the counter- 
part of the " American System '* of protection, was 
to be issued only by the government, and should 
be convertible into interest-bearing bonds. Mr. 
Butler despised gold and silver, which were " the 
money alike of the barbarian and the despot.**' 

1 Carey, Currency, 25, 29 ; Carey, McCulloch, i, 13, 19, 46. 

* Baird, 1 1. 

* Butler's Book, 953-954. This contains speeches in Congress. 



In 187s, Congressman Kelley, of Pennsylvania, 
declared the "Bullion Report" to be an anti- 
quated production of David Rieardo, a "bond 
and bullion monger." For his own part, Mr. 
Kelley was ready to " go for what old Ben Frank- 
lin says," and to follow the guidance of Horace 
Greeley, who had demonstrated the beauty of the 
"interconvertible bond system."^ Finally, Peter 
Cooper persistently urged the necessity of adopt- 
ing a " strictly national currency," " always inter- 
convertible with Government bonds at a low rate 
of interest," "which cannot be taken from the 
hands of the people by the ever-shifting balances 
of commodities between nations." ^ Such utterances 
are fairly typical of the inflationist arguments 
that were current in the years following the war ; 
and it may be interesting to note that the quota- 
tions from Mr. Cooper end with the argument, 
advanced by Cotton Mather nearly two centuries 
earlier, that paper money is " an abiding Cash." 

In 1870, the Supreme Court finally succeeded 
in reversing its earlier decision and declaring the 
issue of legal tender notes to be constitutional. In 
the opinion delivered by Justice Strong, the act 
of 1834, which reduced the value of the dollar by 
two per cent, served to give point to one of the 
arguments advanced in behalf of the greenback, 
which had given the country a paper currency of 

^ Quoted by Leavitt, 193. Cf. Kelley's argument for an " inex- 
portable currency." Kelley, 392-396. 
2 Cooper, 10. 



fifty per cent less value than the medium used m 
1861. The opinion was also expressed that it is 
incorrect to speak of a " standard of value," since 
" value is an ideal thing." ^ Then, in the panic of 
1873, the Secretary of the Treasury, without express 
authority of law, reissued a considerable quantity 
of greenbacks that had been retired and were sup- 
posed to be retained in the Treasury.^ This was 
followed, in 1874, by the passage of the *' Inflation 
Bill," which provided for the issue of $14,000,000 
of the paper; but this measure was vetoed by 
President Grant.* With all this encouragement, 
the greenback rapidly became an important politi- 
cal issue. 

In 1872, the National Labor Reform Party de- 
manded an irredeemable paper currency, issued by 
the government " directly to the people." In the 
following year, William Allen, a noted "Green- 
backer," was elected governor of Ohio upon a 
platform which apprehended danger to the debt- 
or's interests from the resumption of specie pay- 
ments, but did not demand a permanent paper 
currency. In 1874, the Democracy in this state 
called for a "sound currency," but wanted "an 
increase of the circulating medium," which should 
be secured by substituting government paper for 
the notes issued by national banks. The next 
year the platform denounced " the forced resump- 

1 12 Wallace, 548, 553. 

* Muhleman, 28 ; Rep. Mon. Com., 425. 

• Rep. Mon. Com., 424-425 ; Noyet, i^ao. 



tion of specie payments," and demanded that the 
" volume of currency be made and kept equal to 
the wants of trade " ; and, after a close and excit- 
ing contest, Rutherford B. Hayes, the Republican 
candidate, was elected governor by a majority of 
only 50(X) votes.^ This development of a move- 
ment in Ohio for a permanent paper currency is 
typical of what occurred jn several other states. 
As a result, a National Greenback Party was organ- 
ized for the presidential contest of 1876; and Peter 
Cooper was nominated for the presidency upon a 
platform that demanded national paper money, con- 
vertible into interest-bearing bonds.^ In the fall 
elections, 81,737 votes were cast for Cooper ; and it 
is interesting to notice that 66,000 of these came 
from the states of the upper Mississippi Valley, 
and 7187 from Pennsylvania. This, however, was 
but the beginning of the movement ; and the votes 
cast in 1876 for the National Party by no means 
represented tbe strength of the " greenback idea." 
Two years/later, in the Congressional elections, 
the agitation for an irredeemable paper currency 
reached its climax.* In several states a fusion was 
effected between the National and the Democratic 
parties, while in a great many others the Demo- 
cratic platforms contained a more or less qualified 

1 For these various platforms, see Ann. Cyc, 1872, 773 ; 1873, 
610-61 1 ; 1874, 667 ; 1875, 607. 

* On the history of this party, see Andrews, Hist., I. 274-275, 
286, 290-291 ; Leavitt ; Ann. Cyc, 1876-1884. 

« See Atl. Month., XLII. 521-530 ; Nat, XXL 208-209, XXVIL 
64, 221-222. 



indorsement of the proposals of the inflationists.^ 
It is impossible to determine with any accuracy 
the real strength of the movement in this year, on 
account of the complication of issues that arose 
when the Democratic organizations in many states 
became infected with Greenback principles.^ An- 
drews has placed the aggregate Greenback vote of 
1878 at i,0(X),365, while a Greenback writer states 
it at i,4CX>,ooo.^ In 1880, however, the issues were 
once more clearly drawn, and the National Green- 
back party polled 307,740 votes.* Of these, 
195,066 came from the upper Mississippi Valley; 
60,019 came from the South; 35,778 came from 
New York, Pennsylvania, New Jersey, and Dela- 
ware ; 1 1,803 came from New England ; and about 
5000 came from the Pacific coast. This is prob- 
ably the fairest test obtainable of the geographical 
distribution of the inflationist votes, although the 
elections of 1878 furnish a better test of the aggre- 
gate strength when the movement reached its 
height The results of our computations are suffi- 
cient to demonstrate that the real stronghold of 
this Greenback movement was found in the newer 
and more thinly populated regions of the West and 

iAnn.Cyc, 1878. 

*To assume that the total Democratic vote in those states where 
the platform inclined in any degree toward a paper currency repre- 
sents accurately the strength of the inflationists, would be wholly 
unjustifiable. Thus, in Massachusetts, the large vote cast for 
Butler was the result of his peculiar personal following. 

•Andrews, Hist, I. 291 ; Leavitt, 224 ; Ann. Cyc, 1878, 808. 

* Ann. Cyc, 1880, 702. 



South, which, prior to i860, had been supplied with 
a bank currency that was often nothing more than 
a form of irredeemable paper money. More will 
be said in the following chapter of the causes that 
produced this sectional distribution of the vote of 
the National Greenback Party. 

After suffering disaster in the elections of 1874,' 
the Republican Party passed the " Specie-Resump- 
tion Act " early in the following year before the 
control of Congress passed out of its hands.^ 
Under this measure, skilful management of the 
Treasury Department and a favorable revival in 
trade enabled the government to resume specie 
payments in 1879. .Congress seems to have 
exhausted its powers of unwisdom in efforts to 
obstruct the administration ; but it finally became 
evident that the policy of resumption was certain 
to prove successful. Then the inflationists became 
alarmed at the prospect, and enacted the law of 
May 31, 1878.2 This act prohibited the further 
cancellation of the greenbacks, which had been 
reduced to $346,68 i,ocx), and provided that, when 
redemption in specie should begin, the notes 
should not be withdrawn, but must be paid out 
again and kept in circulation. Thus the paper 
currency has remained with us, a permanent bur- 
den upon the Treasury and a constant menace to 
the business interests of the country. 

lU. S. Stat., XVIII. 296 ; Tenth Census, VII. 389 ; Muhleman, 
28-29 ; Noycs, 19-47 ; Rep. Mon. Com., 426-433. 
2 U. S. Stat., XX. 87 ; Muhleman, 28. 


After 1880, interest in the agitation for a liar 
tional paper currency died out for a time, only to 
be revived by the People's Party a decade later, in 
a movement that was most clearly conducted by 
the agricultural classes of the South and West, 
although a union was formed with the labor ele- 
ment in the cities of the East.^ In 1892, Mr. 
Weaver was nominated for the presidency upon a 
platform that called for a national currency, " safe, 
sound, and flexible," to be issued by the govern- 
ment, and to have a volume of $50 per capita. 
This money was to be issued in payment for 
public improvements, and was also to be loaned 
to citizens at two per cent interest.^ The exact 
vote cast by the People's Party in 1892 and 1894 
is not easily determined, but a careful estimate 
places it at 879,469 votes in the former year and 
1,434,253 in the latter.* Of these ballots, Mary- 
land and the states north and east of her cast but 
33,881 in 1892 and 53,717 in 1894. 

iMcVey; g- /• ^.» X. 270-285. 
« Ann. Cyc, 1892, 753-755- 

• But see Ann. Cyc, 1892, 755, where Weaver's vote is placed 
at 1,122,045. 




The agitation for the free coinage of the silver 
dollar forms the last chapter of the history of 
cheap money in the United States. In 1870, with 
a view to the resumption of specie payments, Con- 
gress began to consider the question of revising the 
coinage laws of the country. The silver dollar was 
then worth more than one dollar and two cents in 
gold,^ and had been out of circulation for more 
than a generation. After deliberating upon the 
subject during five consecutive sessions, and secur- 
ing expert advice, Congress passed the "Act of 
1873.'' 2 This law, in accordance with a plan 
formulated three years before, dropped the obso- 
lete silver dollar from the list of authorized coins.^ 
Its deliberate intention, as stated repeatedly in 
Congress,* was to establish legally the single gold 
standard, upon which the currency of the country 

iStat. Abst, 1898, 56. 

2 U. S. Stat., XVII. 424 ; Laughlin, 98 ; Rep't Compt Cur- 
rency, 1876, 170. 

'See report on the act, in Sen. Misc. Docs., 132 ; statement in 
Knox, 150 ; Rep't Dir. Mint, 1896, 461-573. 

*Cong. Globe, 42d Cong., 2d Sess., 2305, 2306, 2308, 2310, 
2316. Cf. speech by Senator Stewart, Cong. Globe, 43d Cong., 
1st Sess., 1392, 1678. 



had actually been based prior to the issue of the 
greenbacks in 1862. The measure aroused no 
opposition at the time because the inflationists felt 
no interest in a silver dollar that was worth more 
than gold, and were then concerned for the main- 
tenance of a depreciated paper medium. But, in 
187s, the "Resumption Act" was passed, while 
the value of silver fell, so that the silver dollar 
became cheaper than the gold. In 1876, when 
the time for the resumption of specie payments 
was approaching and the silver dollar was worth 
only ninety cents, it was discovered that a crime 
had been committed in 1873.^ From that time 
to the present, the "remonetization*' of silver has 
offered the best practicable method of securing a 
cheap medium of exchange. 

In 1876, "Pig-iron Kelley," "Silver Dick Bland," 
and a number of other statesmen introduced in 
Congress bills that provided for the free coinage 
of the old silver dollar, and gave that coin un- 
limited legal tender power .^ The following year, 
a free silver bill passed the House of Representa- 
tives, with the support of such modern "sound 
money men" as John G. Carlisle And William 
McKinley.^ This measure was altered in the 
Senate so that it required the government to pur- 
chase a limited quantity of silver bullion each 

1 See Cong. Rec, VII. 205, 584, 1263, 1265, 1271. For a plaus- 
ible statement of this charge, see Coin, 15-20. For milder criticism 
of the action of Congress, see Walker, Bimetallism, 184, 185. 

« Cong. Rec, IV. 4704, 5186. « Ideniy VI. 241. 



month, and coin it into silver dollars ; and, in 1878, 
the amended act was finally passed over the cour- 
ageous veto of President Iftyes, who appreciated 
the folly of temporizing with the policy of the 

The causes of the strong movement which 
secured the enactment of the " Bland-Allison Act," 
have been carefully analyzed by Professor Laugh- 
lin, in his " Bimetallism in the United States." ^ 
The inevitable reaction from the speculative activ- 
ity and high prices of the era of paper-money 
inflation had resulted in a process of liquidation 
that involved the panic of 1873. The consequent 
period of depression was attended by most un- 
pleasant consequences for all persons who had 
borrowed money on a rising market ; and distress 
caused in this manner was especially prevalent in 
the West, where land speculation had been most 
active, and a large amount of mortgage indebted- 
ness had been incurred. In the years following 
1873, all the conditions were ripe for an inflationist 
movement, since debtors were clamorous for relief 
and there was an abundance of demagogues and 
invertebrate statesmen ready to lead such an agi- 
tation. This movement, moreover, was certain to 
assume a sectional character, because much East- 
ern capital had sought investment in the West, 
and the debtor party was most numerous in the 

1 U. S. Stat., XX. 25. On the history of this law, see Taussig, 
Silv. Sit., 8-49; Laughlin, 179-214; Noyes, 73-126. 
2 Laughlin, 186 et seq. 



newer and poorer states. For this reason, the 
vote in the House of Representatives upon 
the original free coinage bill "was non-partisan 
and almost wholly sectional." "From districts 
west or south of Pennsylvania, only six votes were 
cast against the bill, two of these votes being cast 
by Democrats; from Pennsylvania and the dis- 
tricts east or north of it, the bill received only nine 
supporting votes, and three of thg^nine votes were 
Republican."^ ^ ' i\ 

An examination of the det)aTfes in Congress* 
discloses the fact that the arguments of the free 
silver men were generally pleas for currency ex- 
pansion as a means of relief to oppressed debtors ;* 
and threats were made that, if the measure failed 
to pass, the " Resumption Act " would be repealed, 
national banks would be destroyed, and the United 
States would begin to " issue all the money tg be 
in circulation in the country." Mr. Bland was 
ready, in certain dire contingencies, to issue " paper 
money enough to stuff down the bondholders until 
they are sick," a sentiment that met with the 
applause of the House of Representatives. The 
"Crime of 1873" played its part in the discus- 
sions; members declared that no discrimination 
should be made against a great American product 
such as silver; one speaker invoked "the roai^of 
maddened labor " sounding " like a trumpet-blast of 

1 Noycf, 40. Cf. Harper's Weekly^ Nov. 24, 1877. 

* Blaine, II. 605-608, summarizes the debate in the Senate. 

* Cong. Rec, VII. 601, 602, 957, 958, 1244, 1264, 1265, 1279. 

I 113 


prophecy " ; and gold was denounced as "the money 
of monarchs," the "idol of the miser and the 
thief," the " most cowardly and treacherous of all 
metals." ^ 

Under the operation of this law, 378,160,000 
silver dollars were coined at our mints ; ^ but the 
"friends of silver "were not satisfied. In 1890, 
therefore, the " Sherman Act " was pushed through 
Congress, as the price for which Western support 
was secured for the tariff act of that year.^ This 
was most distinctly an inflationist measure, de- 
signed to increase the government's purchases of 
silver to 4,500,000 ounces per month;* and the 
arguments advanced in its favor were the same 

1 For these references, in order, sec Cong. Rec, VII. 602, 1278; 
1251; 584, 890, 1263, 1265, 1271; 926, 1251, 1271; 589; 1052. 
^ Muhleman, 21. 

• U. S. Stat., XXVI. 289. Senator Sherman's statement that 
the bill was passed to prevent the adoption of a free coinage law is 
clearly erroneous. Sherman, II. 1061 ^/ sg^, Cf. Amer, Hist, Rev.^ 
I. 556. , Mr. McKinley distinctly stated in the House of Represen- 
tatives that the " Sherman Act '^ was the most favorable measure 
for the silver cause that was obtainable, for, " we know we cannot 
have free coinage now." Cong. Rec, XXI. 5812, 5813. There 
seems to be evidence that President Harrison would have vetoed a 
free coinage bill, and no such measure could have been passed over 
his veto. Senator Teller gave what is probably the inside history 
of the "Sherman Act," in his speech of April 29, 1896; and his 
statement that Western members extorted silver legislation as the 
price of their votes in favor of the tariff of 1890 passed unchallenged. 
Cong. Rec, XXVIII. 4561, 4562. 

* On the working of this act, see Taussig, Silv. Sit., 50-83; Noyes, 
139-206; Muhleman, 31-33; White, 204-212; Rep. Mon. Com., 



that had done service in 1878. Thus Representa- 
tive McKinley, in closing the debate upon the law 
of 1890, argued,^ that it was necessary "that the 
country should have an increase of its circulating 
medium " ; that " the silver product of the United 
States " should be used for this purpose ; that this 
would be "just to the silver producers of this 
country"; and that such action would create a 
demand for silver that would "so increase the 
value of that product" as to restore it to a parity 
with gold at the ratio of 16 to i. The closing 
words of his speech were as follows : " For one, 
Mr. Speaker, I will not vote against this bill and 
thus deprive my people, my country, and the 
laborers, and the producers, and the industries of 
my country, of thirty millions annually of addi- 
tional circulating medium." But this concession 
to the inflationist sentiment served merely to add 
fuel to the fires of the silver agitation. After 
three years of disastrous experience under its 
operation, the "Sherman Act " had to be repealed ; 
and this action brought the free silver sentiment 
of the country to a climax, and precipitated the 
campaign of 1896. 

It is unnecessary to review the events that at- 
tended the last presidential election, since they 
must be familiar to all the readers of this essay ; 
but it will be desirable to study the geographical 
distribution of the silver and the gold parties. It 
will be remembered that, in 1877, the free silver 

1 Cong. Rcc, XXI. 5812, 5813. 



movement swept ever)rthing before it in all but six 
of the Congressional districts west and south of 
Pennsylvania ; while the " Bland Act " received 
only nine votes in the Keystone State and in all 
districts north and east of it By 1896, however, 
the upper Mississippi Valley had undergone a 
complete change in sentiment, and cast its votes 
in favor of the maintenance of the existing gold 
standard. The area controlled by the silver party 
was pushed southward as far as Virginia, Tennes- 
see, and Missouri ; and westward as far as Kansas, 
Nebraska, and South Dakota. Even within these 
boundary lines, the states of North Dakota, Cali- 
fornia, and Oregon were lost to the cause of silver. 
This survey of the recent inflationist movement 
may be completed by a detailed examination of the 
votes cast in 1896.^ In making the analysis of the 
results of that election, the following method has 
been employed. The strength of the National 
Democratic Party has been added to the votes 
cast for the Republican candidate, and these fig- 
ures have been taken as the correct measure of the 
sentiment in favor of maintaining the existing con- 
ditions. Then the votes of the Democratic, the 
National Prohibition, and the Socialist Labor par- 
ties have been combined, in order to determine the 
true strength of the forces that favored inflation ; 
because the platforms of these parties advocated 
either the free coinage of silver or a paper cur- 

^The statistics of the vote cast in 1S96 may be found in the 
World Almanac. 



rency issued directly by the government The 
Prohibition Party has been omitted from the com- 
putation, for the reason that its platform ignored 
the question upon which the election turned. After 
this, the writer determined the percentage which 
the anti-inflation vote bears to the total vote of the 
five parties selected for consideration. In present- 
ing the results, it will be convenient to divide the 
states into three groups according to their average 
density of population in the last census year.^ 
The first group includes the eleven states of the 
greatest average density of population, and it will 
be seen that all of these were carried by the gold 
party, usually by an emphatic majority : — 


Average Density ^^^ ^^^^ 


Rhode Island . . . . 318.44 . 

. . . . 71.9 


. 278.48 . 

. . . 72.9 

New Jersey . 

. 193.82 . , 

. . . 62.3 


. 154.03 . 

... 66.4 

New York. 

. 126.06 . 

. . . 59.5 


. 116.88 . , 

. . . 62.9 

Maryland . . 

. 105.72 . 

. . . 56.9 

Ohio . . 

. 90.10 . . 

• • • 52.3 

Delaware . 

. . 85.97 . 

. . . 56.8 

Illinois . . 

. 68.33 . . 

, . . 56.8 

Indiana . . 

. 61.05 . , 

• • • 513 

The second group includes eighteen states of a 
medium density of population, and these show a 

1 These statistics may be found in Eleventh Census, Population, 
I., p. XXXV. Another table containing the results of some slight 
corrections may be found in Willcox, 395. In this computation 
Willcox's 6gares have been used. 




fairly even division of sentiment, eight casting 
a majority vote in favor of the gold standard, and 
ten showing a majority in favor of silver or paper : 


Average Density 

Per Cent 


Kentucky . . . . 

. 46.47 50-5 

Tennessee . . . , 

. 42.34 • • 

. 47.5 

New Hampshire . 

. . 41.81 . 

. 73-5 

Virginia . . . . 

. 41.27 . . 

. 47.0 

Missouri . . . , 

. 38.98 . . 

. 45.7 

South Carolina . . 

. 38.16 , 

. 14.6 

Michigan . . . . 

. 36.46 . . 

. 55.6 

Vermont . . , . 

, 36.39 . 

. 83.1 


. 34.47 . . 

. 56.6 

North Carolina . . 

. 33.30 . 

. 47.1 

Georgia .... 

. 3I.IS . , 

. 39.9 

Wisconsin . . . 

. 31.10 . 

. 61.9 

West Virginia . . 

. . 30.95 • 

. 53.0 

Alabama . . . 

. . 29.36 . 

• 31.9 

Mississippi . . 

. . 27.83 . 

. . 8.8 

Louisiana . . . 

. . 24.63 . 

. . 23.6 

Maine .... 

. . 22.11 . 

. . 70.3 

Arkansas . . . 

. , 21.27 . 

. . 25.2 

The third group comprises sixteen states with 
the least density of population, and it will be 
noticed that only four of these cast a majority 
vote in favor of the gold standard: — 


Average Density 

Per Cent 
OF Gold Vote 

Kansas . . . 

. . . 17.48 . . 

. . 48.2 

Minnesota . , 

. . . 16.54 . . 

. . 58.3 

Nebraska , . 

. . . 13.83 . , 

. . 47.3 

Texas . . 

. . . 8.52 . . 

• . 31.7 

California . 

. . . . 7.78 . . 

. . . 52.1 



Average Density 

Per Cent 


Florida 7.22 26.7 


• 5-34 

. 44.0 

South Dakota 

. 4.54 


Colorado . 

3-99 « 


Oregon . . 

. 3.36 


North Dakota 



Utah. . . 

. 2.56 , 


Idaho . . 



Montana . . 

.98 , 


Wyoming . 



Nevada . . 

. .43 


It is evident, therefore, that the inflationist move- 
ment at the present day, as in all previous times, 
finds its strength in the sparsely settled regions 
where the scarcity of capital is most keenly 

Since this essay is dealing only with certain 
underlying and fundamental facts in the monetary 
history of the United States, it is unnecessary to 
enter into a discussion of all the forces that have 
contributed to produce the agitation for the free 
coinage of silver.^ It suffices for the present pur- 
pose to demonstrate that the silver movement is 
primarily a continuation of the old struggle which 
the debtor classes in the sparsely populated dis- 
tricts have waged persistently in behalf of a cheap 
form of currency. In this respect, the similarity 
between the silver agitation and the greenback 
movement is perfect, whether one considers many 

^On this subject see Walker, Bimetallism, 217-219; /. P. E,, I. 
163-178; e./.£.,X. 269-295. 



of the arguments advanced or the sections in 
which popular support has been found. But it 
should be added, in order to avoid misapprehen- 
sion, that other causes contributed to produce the 
persistent strength of the sentiment in favor of 
the free coinage of silver. The continued fall 
of prices for more than twenty years caused 
undoubted injustice to many debtors, and fur- 
nished telling facts in support of inflationist argu- 
ments. Many fair-minded men found it hard to 
choose between the evils of a single silver stand- 
ard and the hardships of the existing situation. A 
second cause may be found in the political influ- 
ence of the owners of silver mines, who have taken 
an active part in spreading the propaganda of the 
silver party, and have furnished a large part of the 
needful sinews of war. Then, since 1889, seven 
sparsely settled states have been admitted to the 
Union, and have added fourteen votes to the 
strength of the free silver element in the Senate. 
In 1896, these states cast twenty of their elec- 
toral votes for Mr. Bryan, and only three for Mr. 

If this essay has portrayed and interpreted cor- 
rectly the monetary history of the United States, 
one important conclusion may be drawn concern- 
ing the probable future of the agitation for a cheap 
form of currency. If the scarcity of capital in 
sparsely settled areas has been hitherto the pri- 
mary cause for the persistent demand for barter 
currencies, paper money, and a depreciating metal- 


lie medium of exchange, such a movement must 
gradually subside with the growth of numbers, 
wealth, and diversified industries in the regions 
that now form the seat of the silver party. Only 
a few generations have passed since this agitation 
was effectually quieted in the Northern Atlantic 
states. Within the last twenty years, the valley 
of the upper Mississippi has been won from its 
adherence to the old propaganda. The area that 
will henceforth feel the lack of ready capital, and 
desire some cheap form of money, cannot be 
greatly increased by the admission of new states. 
Each passing decade will tend to remove the causes 
that now contribute to the strength of the silver 
movement in the extreme South and West. An 
improvement of banking facilities in these regions 
would contribute materially to the accomplishment 
of this result. In periods of great industrial de- 
pression, especially in times of distress and discon- 
tent among the agricultural classes, the familiar 
nostrums will still be proposed, and the demand 
for "more money" may be renewed for a long 
time to come. But, in the absence of some great 
industrial cataclysm, there will be a continual nar- 
rowing of the field within which the agitation for a 
cheap currency can hope to secure any large meas- 
ure of popular support. 


Part II 



EARLY ISSUES (1712-1748) 

The early settlers in North Carolina, like those 
in other colonies, were driven by their poverty to 
resort to the use of a barter currency. In 1709, 
Rev. William Gordon wrote: "In this as in all 
other parts of the province, there is no money; 
every one buys and pays with their commodities, 
of which corn, pork, pitch, and tar are the chief." 
The prices of these articles were fixed by law, but 
at figures that a person could seldom secure for 
them " after considerable expense and risk." The 
result was that three shillings of this barter money 
were reckoned as no better than one shilling ster- 
ling.^ The lords proprietors naturally enough 
objected to receiving such a medium in payment 
of quit rents, and instructed the receiver general 
to demand sterling money upon all occasions. In 
1 71 3, the receiver represented to the council of 
the province that he could not comply strictly with 
this requirement, and was advised to accept " any 
Good and Merchantable Commoditys of this country 
at ye rated price." ^ The council further expressed 
the opinion that rice well-dressed and cleaned, when 

1 This letter is reprinted in Hawks, II, 309. 
aCoL Recs. N. C, II. 34-35. 



accepted at the rate of i/j. 6d, per cwt. "is ye 
true value of Sterl. money." 

An enactment of 171 5 made seventeen leading 
commodities a tender for debts. ^ These staple 
articles were not receivable, however, unless in 
good condition; and special contracts were ex- 
cepted from the operation of the law.^ A few 
years later three other commodities were added to 
the list, and the ratings of wheat and corn were 
raised ; while it was provided that five of the most 
bulky articles must be delivered at some conven- 
ient landing upon a navigable stream.^ Governor 
Burrington claimed that when this last enactment 
was made, rice was valued at a rate that led to a 
depreciation of the commodity standard.* In 1731, 
he said, concerning the practical working of the 
act of 171 5, that, however accurate the original 
rating of the goods may have been, it soon became 
incorrect and unequal ; so that, for instance, while 
deer skins had remained at about the value fixed 
by the law, pitch and tar had fallen to one-quarter 
of the legal valuation.^ The result was that " Peo- 
ple generally take advantage to pay in the worst 
Commodity which often occasions unfairness in 
Trade and Dealings." Burrington expressed the 
belief that the law was especially liable " to perplex 

^Records, III. 185, IV. 292, 920-921; Basset, 60. On the in- 
complete and fragmentary nature of the early records of the colony, 
see Records, I., pp. III.-V. 

« Idem^ IV, 292. Cf. Williamson, 1. 163; Hawks, II. 163-164. 

» Records, IV. 293. * Idem, III. 615. 

6/d5fw, III. 185. Cf.p. 615. 


EARLY ISSUES (1712-1748) 

strangers tradeing," and to encourage frauds in 
such cases. 

In 1750, Governor Johnston stated that payment 
of the provincial taxes in produce had continued 
" with very little Alteration " of these earlier laws, 
and that this had resulted in " great Damage to the 
Revenue," since it was " a stated rule, that of so 
many Commodities the worst sort only were paid." ^ 
The people of the colony, however, clung persist- 
ently to the practice, despite the governor's com- 
plaints.^ Even the quit rents had to be collected 
in this barter currency,^ since the only alternative 
would probably have been a complete non-payment 
of these unpopular dues, which were always in 
arrears at the best. 

North Carolina for various reasons long re- 
mained an extremely poor colony, and was slower 
in developing an extensive commerce than many 
of her neighbors.* For this reason specie would 

^ Records, IV. 920-921. Cf. the opinion of Governor Burring- 
ton, III. 185. 

^ Johnston called it " an odious sham method of supporting the 
Charges of Government." Records, IV. 923. 

'Johnston wrote in 1740 that the colonists insisted ''on pa3nng 
their Rents in the worst and most bulky kind of their produce," and 
they insisted on paying these " hopeful! Commodities " either at 
their houses or at forty-two different landings. Yet he thought it 
was impossible to abolish the practice entirely. Records, IV. 415. 
In 1738, the Board of Trade inquired into the matter particularly, 
and found that the practice had been forced upon the collectors. 
Records, IV. 294. 

* See Basset, 14, 15. Hawks, II. 252-289, gives an account of 
the trade of the province. 

127 . 


have been scarce even without the influence of the 
barter and paper currencies that were introduced. 
Yet coins and plate are sometimes mentioned in 
the early laws. In 171 5, an act was passed " ascer- 
taining the currency of Dollars," and Governor 
Burrington states that this was intended " to bring 
Dollars into the Country " ; ^ but, he adds, " it 
never had the eflfect/' This enactment probably 
rated " the Lion dollar " at three bushels of Indian 
corn.^ Since a law of the same year rated corn 
at IS. id. per bushel,^ this was equivalent to a rating 
of 5^. for the lion dollar, which was worth but 3^. 
7»7d. sterling.* This was a little more than the one- 
third advance over sterling allowed by the royal 
proclamation of 1704 and the act of 1707. Hawks 
states that another provincial law of this period 
provides for the distribution of silver plate forming 
part of estates belonging to orphans.* In 1724, 
Governor Burrington was instructed to enforce the 
statute of 1707 relating to the valuation of foreign 
coins;® but in 1729, after the paper currency had 
fallen to one-fifth of the value of sterling, silver 

1 Records, III. 18. 

* I assume that this is the law mentioned by Hawks, II. 164. 
Mr. Hawks evidently examined the manuscript copies of the laws 
of 1715. 

« Records, IV. 292. 

* Sir Isaac Newton assayed the lion dollar of Holland at 14 dwts. 
2.7 g. Bne contents, and valued it at 43.7^. sterling. See Postle- 
thwayt, L 523; Chalmers, 67* 

* Hawks, II. 174. 

* This statement is made on the authority of Martin, I. 295. 


EARLY ISSUES (1712-1748) 

was rated at 25^. per ounce,^ which was nearly 
five times the sterling rating of 5^. 2d, per ounce. 
At the same time gold was rated at ;;^i per dwt., 
which would give a ratio of 16:1 between the 
white and the yellow metals. 

North Carolina resorted to paper money for the 
first time in 171 2 in order to "defray the Charges 
of an Indian War then kindled." ^ Taxes had 
been levied for this purpose, but ;^4000 of bills 
were issued in order to anticipate the work of col- 
lection.^ The notes bore interest, and were to be 
redeemed at stated times out of the receipts from 
the taxes.* They seem also to have been made 
a legal tender for all payments in which the rated 
commodities were receivable.* But the Indians 
remained troublesome, and the war continued ; so 
that an issue of £^000 was made in 171 3,® prob- 
ably upon the same terms as that of the previous 
year.^ From a report made in 1740® we learn 

1 Hawks, II. 286. 

2 Records, I. 838, III. 145, IV. 576. 

» Idem, III. 484. * Ideniy III. 145, 484. 

* The Records state merely that this first issue was made <' Cur- 
rent in all payments." III. 145. But the issue of 1713 was made 
" passable for all debts for rated commodities of the country." II. 
50. This was probably the case with the first issue. 

* Records, II. 50, IV. 576. The historians have erroneously 
stated that this was the first emission. Williamson, I. 205; Martin, 

I. 264; Hawks, II. 280. On these early issues see also Records, 

II. pp. IV.-V. 

7 Records, II. 50; Martin, II. 264-265; Williamson, I. 205. 

* Records, IV. 576. Williamson says that these bills depre- 
ciated. History, I. 205. 

K 129 


that this emission "depreciated the value of the 
whole" about forty per cent, a fact that is not 
surprising since the population of the colony at 
this time was less than io,ocx)^ and the total 
amount of paper in circulation was ;£ 12,000, equal 
to $40,060.^ 

In 1715,^ a new issue of ;;^24,ooo was ordered.* 
One-half of this sum was to be used for retiring 
the ;£ 1 2,000 then in circulation, and the remain- 
der was applied to the payment of public debts. 
Holders of the old bills were required to bring 
them in for exchange before March 25, 1716, after 
which date the notes should "be of no value." 
Two years' interest was to be paid on the old bills 
thus exchanged. The new issue was made legal 
tender " for any of the rated Commodities of the 

* In 1 71 7, Colonel Pollock estimated the number of" tithables" 
at 2000, which would give 9000 or 10,000 as the total population, 
black and white. Records, II., p. V. All estimates of this charac- 
ter are mere approximations to the truth, but are the best that are 

2 I assume that the proclamation rates prevailed in North Caro- 
lina at this time. This accords with the rating of the lion dollar at 
5J. in 1 715. At proclamation rates the colonial pound was $3.33. 

* There may be some uncertainty as to the date of this enact- 
ment. The report of 1740 places it at 1714, and says the bills were 
continued by an act of 1 71 5. Records, IV. 576. The editor of the 
Records makes the date 1 7 14. See II., p. V. On the other hand. 
Governor Burrington in 1733 gives 171 5 as the date. Records, III. 
485. Hawks, who examined the manuscript records, gives the same 
date. History, II. 280. The text of the act itself seems to point to 
the year 1715. See Records, III. 178-179. 

* This act is preserved. Records, III. 1 77-1 79. Extracts arc 
given by Hawks. History, II. 280-281. 


EARLY ISSUES (1712-1748) 

Country or other Money allowing fifty per cent 
between the same and sterling." Probably the 
intention of the law was to make the paper equal to 
the barter currency of the colony, which was below 
sterling and was called "Proclamation money," ^ 
since ;;^I50 colonial was reckoned by the men who 
framed this law as equal to ;^ 100 sterling.^ This 
may be taken as the base from which to compute 
the depreciation of the paper. To this tender law 
was added a forcing clause which provided that 
any one who refused the paper at fifty per cent 
advance over sterling, should forfeit one-half the 
value of the sum refused; while a later section 
enacted that any member of the assembly who 
should thereafter make any motion judged to be 
"derogatory and prejudicial to the Publick Credit 
of the said Bills," should be denounced as an 
enemy to the country and fined twenty pounds. 
Martin justly observes that a proposal to issue 
more bills was not considered to be a remark of 
this character.^ Finally, the law of 171 5 enacted 
that any person convicted of counterfeiting the 

1 See Records, III. 615, where Governor Burrington refers to 
the rated commodities as '* Proclamation money.'' 

* The standard of value in North Carolina was the barter shilling 
or pound, before paper was issued. We have seen that in New Eng- 
land the barter money was worth only two-thirds as much as specie. 
Bronson, 21. Then ;f 150 colonial would equal ;^ 100 sterling. This 
may well have been the rate of exchange for the best commodities 
in North Carolina. Commonly the barter currency was at a greater 
discount. Hawks, II. 309. 

• History, I. 293. 


bills should be punished "as guilty of Felony 
without the benefit of Clergie." The new bills 
bore no interest, and no time was set for their 
redemption.^ The legislature, however, in the 
same year levied a tax on polls and land, which 
was intended to bring in ;£20CX) annually " till the 
Publick Debts are answered and paid." At the 
same time a pledge was made that the tax should 
not be lowered or repealed, and that no more bills 
should be emitted, until all of the outstanding 
paper should be retired.^ 

These earliest acts for issuing paper money 
illustrate perfectly the usual course of legislation 
upon the subject. The first emission was small, 
and it bore interest and was redeemable at stated 
periods. It was justified, furthermore, as an emer- 
gency measure. But the needs of the government 
did not decrease, and the legislature made a new 
emission twice as large as the first. This caused a 
depreciation of forty per cent. The next steps were 
to cure the inflation by issuing twice as much 
money as was already in circulation, to make the 
new bills redeemable at no definite time, and to 
pay no interest upon the notes emitted. Then, 
under the pretext of supporting the credit of the 
bills, a forcing law was passed to fcompel creditors 
to receive the paper, which was already depre- 
ciated. Finally, a tax was levied which would, 
if collected, make it possible to retire the notes in 

1 Cf. Records, III. 485. 

2 Idem, III. 189, 485. Cf. Martin, I. 275. 


EARLY ISSUES (1712-1748) 

ten years ; and the legislature pledged the public 
faith to issue no more paper, and to keep the tax 
in operation as long as it might be needed. We 
shall see how these promises were kept, and what 
such a pledge of the public faith was worth. 

But doubling the amount of the currency did 
not improve its condition, for in 171 7 Colonel 
Eden reported it to be "at a vast discount,"^ 
while four years later it was reported at 1 50 per 
cent advance over sterling.^ Accordingly, as a 
further support to the credit of the paper, the 
assembly petitioned the proprietors of the province 
to receive the bills in payment of the rent for 
lands ; but this request was refused, although the 
proprietors expressed a willingness to receive the 
rated commodities of the country instead of specie,^ 
for these articles could be transported to England. 
Colonel Pollock thought that the bills would be- 
come " very current in a short time " if they could 
be used in these payments.* For a time the tax 
levied in 171 5 seems to have been collected, and 
some of the paper seems to have been retired, in 

* Records, II. 270. The report of 1740 says that the bills issued 
in 1 715 depreciated eight per cent " from the value of their first 
emission.** Idem^ IV. 576. This can hardly be correct in the face 
of the other evidence. 

^Idem, II. 417. This meant that £100 sterling was equal to 
;^250 colonial. 

•//«w, 11. 243-244, 250; Williamson, I. 205-206. It is possible 
that some payments may have been made in paper after all. 
See Remarks of Burrington, III. 145. 

* Records, II. 296. 


accordance^ with the pledge made at that time. 
But, as Governor Burrington wrote,^ " that Faith 
was afterwards broke in upon." The tax had 
called for 1 5^. per poll and zr. 6d, for every hun- 
dred acres of land.^ In 1722, the legislature com- 
mitted " the first public breach of the Funds laid 
for sinking the bills," and reduced this tax to 5^. 
per poll.* 

By this time it was estimated that about ;^ 12,000 
of the bills of 171 5 were yet outstanding;* while, 
if the annual tax of ;;^2000 had been faithfully col- 
lected and applied to the proper purpose, the notes 
in circulation could not have exceeded ;£ 10,000. 
A new emission of ;;^i 2,000 was now (1722) voted 
in order to exchange the old bills, which were said 
to be torn and defaced.® These new notes were to 
be a legal tender at fifty per cent advance on sterling 
in all contracts where payment in specie was not 
expressly required, and holders of the old money 
were given a few months in which to effect an ex- 
change of old for new bills.^ Counterfeiting was 

1 Records, III. 485, IV. 576. In 1717 Pollock said that the 
bills then outstanding amounted to no more then ;f 16,000. Idem, 
II. 296. But this seems to be too small a figure, because the tax 
levied in 1 71 5 to sink the ;^24,ooo then issued amounted to only 
£71000 annually, if collected. 

^Jdem, III. 145. 

^Jdem, III. 189. 

^ Idenii III. 190, 485. Hawks describes this law. History, II. 

fi Records, II. 485, IV. 576; Hawks, II. 282. 

•Records, III. 190, 485, IV. 576. 

T These facts are taken from Hawks, II. 282. Cf. Martin, 1. 293. 

EARLY ISSUES (1712-1748) 

again made a capital offence. The consequence 
of this legislation was that from 1722 to 1729 the 
bills of credit circulated ** at the proportion of five 
for one sterling," ^ a result which probably was not 
regretted by the men who made the paper legal 
tender at a rating of 1.5 to i. It appears, more- 
over, that no more bills were cancelled after 1722 ; ^ 
but that the assembly, when bills were drawn in 
through payments of the poll tax of five shillings, 
"usually ordered them to be pay'd — out again,'* 
for contingent expenses.^ Thus the public faith 
was continually broken, in a manner not uncom- 
mon in the colonies. 

For the reasons just stated there were in circu- 
lation, in the year 1729, fully* ;£ 12,000 of bills 
issued prior to 1716 and reemitted in 1722. The 
assembly had succeeded in preventing a contrac- 
tion of the redundant currency, although Governor 
Burrington is said to have received instructions in 
1724 to have the paper redeemed and cancelled.* 
Not content with this, the inflationists took advan- 
tage of the prospective transfer of the province 
from the proprietors to the Crown to secure a 

1 Records, IV. 576. 

^Identy III. 190. 

»/flr^»i, III. 485-486. 

*In 1729, the assembly estimated that ;£'2000 of the currency 
had been lost, and that only £io,ocx) was in circulation. Iiftm, 
III. 190, IV. 576. But the ;f2000 finally proved to be in the 
hands of citizens. /</<fw, IV. 101-102. ^"^^^^ 

^This is Martin's statement. History, I. 295. I have been 
unable to find Burrington's instructions of an earlier date than 1730. 
See Records, III. 66. 


large addition to the bills of credit. The last pro- 
prietary governor, foreseeing that he would soon 
have to leave his position, is said^ to have been 
induced, " by a shameful collusion " with the legis- 
lature, to consent to an issue of £^0^000? Of 
this sum, ;£io,cxx5 was to be exchanged for the 
old bills emitted in 1722 and still in circulation, all 
of which must be brought in within a certain time. 
The remainder, amounting to £10^000^ was to be 
loaned to the inhabitants upon the security of mort- 
gages on unincumbered lands of double the value 
of each loan. The bills were apportioned among 
the precincts according to the number of tithables 
in each, and placed in the hands of the precinct 
treasurers. One-fifteenth of the principal of each 
loan was to be repaid annually, with interest at a 
little more than six per cent. Twenty shillings of 
the new currency were to be rated at 15 dwts. of 
silver. This was four times the rating of silver in 
Virginia,® which the legislature took for a basis, 
and is an admission of a depreciation of four to 
one proclamation money, or more than five to one 
sterling.* Existing obligations were to be settled 

1 This is "Williamson's statement. History, II. 38. 

2 Records, III. 145, 175, IV. 178, 419, 576. Cf. Martin, I. 301; 
Williamson, II. 37-39. Hawks gives a long account of this law, 
but gives 1727 as the date. History, II. 282-287. 

•An act of 1727 in Virginia had rated silver at 4^. per dwt. 
Hening, Stat., IV. 218. 

* Since silver was worth 55. 2d. per oz. according to the sterling 
standard, this would make exchange about £$^1 North Carolina 
currency to £iQO sterling. Cf. Records, IV. 419. 


EARLY ISSUES (17 12-1748) 

according to the usage at the time when they were 
incurred, but future contracts were to be in terms 
of these bills. If the new currency should depre- 
ciate, the legislature was annually to ascertain and 
declare the value of twenty shillings of bills in 
terms of silver. The notes were declared a legal 
tender at the specified ratings, and fourteen of the 
rated commodities were given new values in terms 
of this new currency, while silver was rated at 2is. 
per ounce.^ 

Thus was established a loan bank system such 
as had been introduced in several other colonies, 
and it was computed that the interest and princi- 
pal would amount to ;£4S,ooo at the end of fifteen 
years. This would redeem all the bills emitted in 
1729, and leave a surplus of ;£socx) available for 
the current expenses of the government, which 
thus expected to derive direct pecuniary benefit 
from the scheme.^ Since the population of North 
Carolina must have been, in 1729, considerably 
less than 36,000,^ and the trade of the province 
was not large, a further depreciation of the paper 
ensued. By 1 73 1, exchange was * at £700 or ;£8oo 
provincial currency for ;£ioo sterling, and the gov- 

1 These figures are given by Hawks, II. 286. The rating of 
2$s, per ounce for silver is inconsistent with the rating of 20s. of 
the bills at 15 dwts. of silver. 

* See Records, IV. 178-179; Hawks, II. 285. For a copy of 
one of these bills see Hawks, II. 280. 

*In 1732, the population was estimated at 30,cxx> whites and 
6000 blacks. Records, II., p. XVII. 

^ Idem, 111. 146. 


ernor could call the paper ** worse than any of the 
commoditys." ^ The royal officials in the colony 
suffered from this advance in exchange on Lon- 
don, since their salaries had been fixed before the 
bills had been emitted.^ When the assembly voted 
a salary of ;^ioo in paper for the chief justice of 
the province, the governor asked for an increase, 
stating that ;£8oo in currency would be worth but 
;£ioo sterling. The assembly replied that ex- 
change was, in their opinion, only ;£ 500 for ;£ioo, 
and that the salary would suffice.® Williamson 
has spoken very forcibly concerning this enact- 
ment of 1729. He says:* "Although every man 
in the colony saw that too much paper was in cir- 
culation, for it passed below the nominal value, 
excuses were formed, once and again, for making 
more." " Of all the varieties of fraud that have 
been practised by men, who call themselves hon- 
est, and wish to preserve a decent appearance, 
none has been more frequent, in legislative bodies, 
than the attempt to pass money for more than its 
proper value. There are men who conceive, that 
^crimes lose their stain, when the offenders are 
umerous ; that in the character of legislators, 
hey cannot be rogues, ' defendit numerus,' There 
J re men, who would be ashamed to acquire five 

1 Records, III. 185. 
^Idgm, III, 271, 309. 

• Idem, III. 283. Burrington wrote the Lords of Trade that he 
had offered to take silver at 8 for i, but only one man had been 
willing to pay the governor's fees at that rate. Idem^ III. 208. 

* History, II. 38, 39, 40. 


EARLY ISSUES (17 12-1748) 

shillings by stealing, picking a pocket, or robbing 
on the highway ; but they would freely, and with- 
out blushing, assist in poocinnr ^^Jf,'"^ to defraud 
their creditor out of half Tiis just demand. There 
are instances of men being banished from Carolina 
for stealing a hog, not worth five dollars ; while 7^^ 
the men who banished them, would contend for / vt^^^V 
paying a debt of seven pounds with the value of ^ 

twenty shillings." 

Since the act of 1729 was passed just after the 
surrender of the province to the Crown, and had 
been approved by the proprietary governor, the 
assembly managed to get the new bills into circu- 
lation at once ; and thus secured the best of the 
argument when the validity of the law was called 
in question by the royal governor. ^ In 1730, Bur- 
rington, who had come out as governor, received 
instructions to approve no more bills for issuing 
paper money unless they contained a clause sus- 
pending their operation until the royal assent had 
been secured ; and his successor was given similar 
directions. ^ As happened elsewhere, frauds were 
committed in the valuation of lands, and bills were 
loaned upon inadequate security.® Then, too, 
when the precinct treasurers in 1734 were ordered 
to render accounts and produce the money paid in 
for interest and annual instalments of the prin- 
cipal, they turned in only one-tenth of the amount 

1 Records, III. 146, 175, 486, IV. 179. 


^Jdem, III. 145. 


actually due.^ Of the ;£i2,cxx) of old notes issued 
prior to 1729, ;£9555 were exchanged for new 
bills by 1 73 1, and were subsequently bumt.^ The 
;£2CXX5 of old bills that were assumed to be lost in 
1 729 turned up in the hands of the receiver of the 
powder duties six years later, and were exchanged 
for new currency.^ 

When the assembly of North Carolina met in 
January, 1735, the governor called its attention to 
the bad state of the currency, caused by the coun- 
terfeiters who seemed to be industriously at work.* 
The assembly readily agreed to remedy this evil at 
once,^ and proceeded to prepare an act for ex- 
changing the old bills for new. If the annual 
instalments of one-fifteenth of the y^30,cxx5 loaned 
in 1729 had been punctually paid with interest, at 
least ;£ 1 6,000 of the ;£40,ooo emitted would have 
been returned by the end of 1734. Such pay- 
ments, however, had not been made in many cases; 
and the receivers had turned in only one-tenth of 
the money then due.^ But under the law as it 
stood, the annual instalments of the principal 
were due, and should be retired from circulation. 
Accordingly the assembly seized upon the gov- 

1 Records, IV. 179. 

2/<i;f»j, III. 324, 546, 583. 

^Ideniy IV. 101-102. 

^Idem, IV. 78. The severe penalties of the early laws had 
been continued by the act of 1729. Hawks, II. 286. In 1726, an 
indictment was found against a counterfeiter. Records, II. 669. 

*/^/w,IV. 82. 

^ Idem, IV. 179. 


EARLY ISSUES (1712-1748) 

emor's proposal to remedy the evils of counter- 
feiting, as an excuse for preventing the withdrawal 
of any of the bills then in circulation. The pretext 
for this action was that large arrears of quit rents 
were due, and could not be paid without the cur- 
rency.^ An act was passed,^ therefore, providing 
that all the money due and to fall due on the prin- 
cipal of the loan of 1729 should be let out again at 
six per cent interest for the space of ten years, at 
which time the original fifteen years would expire 
and the entire sum loaned would become due. 
This law provided, also, that, in order to remedy 
counterfeiting, all the notes outstanding should 
be brought in and exchanged for new bills. The 
notes of this issue were not made a legal tender 
at any fixed rate,® and it was probably intended 
to have valuations of the currency fixed from time 
to time. Governor Johnston wrote to the Board 
of Trade* that this enactment "was intended purely 
for the benefit of the Inhabitants of the Province 
that they might be certain of at least a Currency 
of ;;^40,ooo for Ten years to come." By means of 
it the assembly made impossible the gradual retire- 
ment of the paper, and so shaped matters that 
at the end of ten years the whole sum of ;£40,ooo 
would be legally subject to retirement. Since 

1 Records, IV. 179, 576-577. 

^ Idtm^ IV. 179-180, 419. In a report made in 1740 the date 
18 erroneously given as 1734. Idem, IV. 576-577. Martin makes 
the same error. History, II. 18. 

» Records, IV. 419. Cf. p. XXII. 

* Idem, IV. 179. 



there was absolutely no prospect that any subse- 
quent legislature would consent to the immediate 
retirement of the entire currency, it seems probable 
that the law of 1735 was intended to make certain 
the permanence of the paper money. 

But while the assembly was at work on this sub- 
ject, it did not stop with providing for the continued 
circulation of the amount of currency already out- 
standing. The commissioners appointed to stamp 
the bills were authorized ^ to manufacture ;^25oo 
more " to defray the Charges " of the operation. 
Then ways and means had to be devised for pay- 
ing various debts amounting to ;£i4,i50. Since 
the governor considered it "absolutely necessary 
these debts should be paid off as soon as possible," 
he consented to an emission of ;£io,ocx) in bills of 
credit, which were to be sunk by a poll tax which 
should continue in operation for five years.^ Thus 
the currency of the province was increased to 
;£S2,SCX); whereas, if the law of 1729 had been 
enforced in good faith, the issues outstanding 
would have been reduced to less than ;^24,ocx) by 
1735- By this time the population of the province 
was about 50,000, whites and blacks;^ and the 

1 Records, IV. 179-180. 

^Idem, IV. 108, 179-180, 419. The report of 1740 says that 
jf 1250 were emitted. IV. 577. This is clearly a clerical error, 
and ;f 12,500 is meant. This is the sum of the two emissions men- 
tioned in this paragraph. 

•In 1735, the whites alone were estimated at 40,000. Idem^ 
II., p. XVII. Mr. Saunders estimates the total population at 50,000 
in 1734. Idem^ IV., p. XX. 


EARLY ISSUES (i 712-1748) 

circulating medium, therefore, amounted to about 
j!3.SO per capita} This was a large sum for such 
a poor colony, but not a larger relative amount 
than was outstanding in 1729. Exchange on Lon- 
don was at six hundred per cent advance over 
sterling in 1736,2 which would make ;£700 colonial 
equal \,o £,\QO sterling. 

Meanwhile the governor and assembly had 
become involved in a dispute concerning the pay- 
ment of the quit rents.^ Governor Johnston in- 
sisted that, if rated commodities were tendered in 
these payments, they should be delivered at four 
convenient places ; whereas the people insisted that 
the articles could be tendered on the land where the 
rents accrued, and thus endeavored to throw the 
heavy costs of transportation on to the government. 
But, more than this, Johnston announced* that 
he would receive payment in sterling money or 
in bills of credit at ratings fixed by his council. 
The assembly protested vigorously, but without 
effect; and then tried unsuccessfully to pass a 
law providing that the value of the bills of credit 
should be determined yearly by the governor and 
delegates from each branch of the legislature.^ 
The governor then endeavored to secure the 

^ This is computed upon the basis of proclamation rating, which 
gives ^53.33 to the pound. 

2 Records, IV. 225. This is the estimate of the provincial coun- 
cil, and may be less than the actual rate of depreciation. 

•This dispute was an old one. See Records, III. 541, 548-549. 

*0n this subject see Records, IV., pp. XIV- XVIII. 

»/flr^»f, IV. 175-185. 



passage of orders in council authorizing him to 
settle the rates at which paper money or rated 
commodities should be received.^ The dispute 
continued until 1739, when an act was passed 
providing that the governor, council, and delegates 
from the assembly should "regulate the value'* 
of the bills annually .^ In March, 1739, the de- 
preciation was fixed, in accordance with this law, 
at ;£iooo colonial currency for ;£ioo sterling.® 
Since the delegates of the assembly participated 
in this action, it is probable that a depreciation of 
ten to one was too patent to be denied.* 

There is a statement to the effect that in 1738 the 
members of the legislature applied to the payment 
of their own salaries interest money received from 
the bills emitted in 173 5, although these funds had 

1 Records, IV. 205. In 1 737, the assembly ordered that collectors 
of the quit rents should be arrested for compelling people to pay in 
the manner desired by the governor. Idem^ IV. 272. Cf. William- 
son, II. 41-43. The governor dissolved the assembly. 

* Records, IV. 416, 419. 

^Idemy IV. 416, 419, 577. Governor Johnston said that the bills 
had previously been accepted at seven for one, and that the valuation 
of 1739 would increase the revenue. Idem, IV. 416. This law of 
1739 was disallowed by the Crown, and the entire controversy 
was reopened in 1741. This continued for eight years before 
another quit rent act could be passed. Id^mt IV., pp. XVII- 

* Williamson, II. 38-39, gives some statistics of depreciation. 
He states the depreciation at 3 J for i in 1730 and 7i for i in 
1739. The reader must notice, however, that this relates to the 
exchange between paper and proclamation, or barter, currency. 
This was only two-thirds the value of sterling; and with this allow- 
ance, Williamson's figures are nearly like those given here. 


EARLY ISSUES (1712-1748) 

been pledged for sinking the bills.^ However this 
may be, it is certain that a violation of all good 
faith was committed in 1739. In February of that 
year the commissioners appointed for exchanging 
the bills of 1729 for those issued in 1735 reported 
that, out of the ;£40,ooo of old notes, ;^3 7,849 had 
'been replaced by bills of the last emission.^ This 
left a balance of new bills which the legislature 
ordered to be issued "in order to discharge the 
Publick debts of this Province."® It turned out 
that these " Publick debts '* were the wages of the 
legislators themselves; and the lower house, in 
asking the concurrence of the upper chamber in 
this action, admitted * that the balance in question 
"ought to be applyd (by Acts of Assembly) to 
other purposes," so that the proposal might "be 
deemed a violation of the Publick faith." The 
council without delay passed this resolution, which 
is actually termed in the minutes of the assembly 
" a message " "in relation to the payment of the 
wages of the Members of Assembly out of other 
funds than are or ought to be appropriated for 
said use." ^ Thus it appears that a legislature of 
manufacturers of paper money could not only vio- 
late the public faith for personal ends, but could 
do this openly and deliberately with a brazen 
effrontery that would make a highwayman blush. 
In 1739, Dr. William Douglass wrote, concern- 
ing the currency of the colony, the following 

1 Records, III. 185. « Identy IV. 367, Vio-yji, 398-399* 

^Idem, IV. 399. * Idem, IV. 409. 6 Idem, IV. 413. 

L 145 




words : ^ " North Carolina, an inconsiderable 
Colony scarce capable of any Fund for Paper 
Emissions; have notwithstanding 40,000/. upon 
Loan, and 12,500/. upon Funds of Taxes, At 
present Exchange is settled by their legislature at 
10 North Carolina for I Sterling^ It will be seen 
that this statement is correct, except that the 
amount " upon Loan " was £,10,qqo? 

In 1740, Great Britain having become involved in 
war with Spain,^ North Carolina was called upon 
to take part in an expedition against Florida.* 
The assembly promptly resolved "that a certain 
Quantity of New Bills will be the most speedy 
way to defray the Expenses of transporting the 
Troops to be raised in this colony," but the gov- 
ernor refused assent,*^ since his instructions forbade 
him to approve of a law for issuing bills of credit 
unless it contained " a suspending Clause " provid- 
ing that it should not go into effect until "his 
Majesty's pleasure should be known." Accord- 
ingly a tax was levied^ and made payable in rated 
commodities or in bills of credit at the ratio of 
;£7.S in paper for ;£i in proclamation money.^ 

^Douglass, Discourse, 316-317. 

^This error was natural since the entire amount emitted in 1729 
and reemitted in 1735 was ;f 40,000, of which jf 30,000 was loaned. 
Cf. Records, IV. 178-179. 

» Winsor, V. 381-385; Hildreth, II. 376-377. 

* Records, IV. 552, 553. « Idem^ IV. 557. 

6 Idem, IV. 558, 574. 

^ The Records contain only one allusion to this provision, and 
that mentions a rate of 7 for I. But the bill was amended several 


EARLY ISSUES (17 12-1748) 

It was estimated that this levy would bring in a 
sum equivalent to ;£i2CX) sterling.^ The colony 
was now to receive a striking demonstration of the 
disadvantages of its barter and paper currencies. 
When an efifort was made to secure transportation 
for the four hundred men raised in North Carolina, 
" no owners of Vessels cared to take their Paper 
Currency and Commodities in Payment.'*^ The 
governor then found that bills of exchange on 
London could not be negotiated in the province, 
so that he was obliged to draw upon the commis- 
sioners of the royal navy in order to raise passage 
money for the troops.® 

In 1740, Governor Johnston had written that the 
;£52,5CX)* then outstanding was equivalent to no 
more than ;£scxx) sterling, that it would be retired 
in 1745 in accordance with the existing law, and 
that he hoped " after that we shall never more be 

times after that. Martin and Williamson state that the rate was 7.5 
for I, and I have accepted this statement. Martin, H* 34; William- 
son, II. 55-56. Proclamation money was, of course, the pound or 
shilling of North Carolina's barter currency. Since this was worth 
only two-thirds as much as sterling, a rating of £7*$ paper for £i 
barter, or proclamation, currency was the same as ;f 11.25 paper for 
£1 sterling. 

1 Records, IV. 421. 

^ This statement omits the balance of something more than 
£2000 which the assembly had paid out for its own wages in 1739 
instead of using for the redemption of old bills. The balance was 
stated by the commissioners as ;f 3300 ; but this cannot be correct, 
as they had redeemed £yji^19 o^t of jf 40,000 of the former issues. 
Idem, IV. 398-399* 



plagued with any Paper money." ^ But the legis- 
lature was of a different mind. In 1744, when 
under the existing law the whole batch of paper 
had but one more year to remain in circulation, the 
governor called the matter to the attention of the 
assembly .2 The lower house proposed to "sink 
the Bills of Currency " by replacing them with a 
new issue.^ The contemplated emission was to 
be for ;£i6,ocx), "equal in value to Proclamation 
money.'** Since the ;£52,500 of bills then in 
circulation were worth no more than ;£5000 ster- 
ling, or £7000 to £7500 proclamation money, it is 
evident that the legislature hoped to inflate the 
currency still more by the expedient of manufac- 
turing bills of a new tenor. But the upper house 
objected to one clause of the measure that provided 
for the payment of the wages of the members of 
the legislature out of the new bills.^ It was also 
thought that the new emission was to be made 
current for too long a period, and that the taxes 
laid for redeeming it were not sufficient. The 
council proposed to limit to five years the time that 
the notes should run, and to make the tax two shil- 
lings per poU.^ Thereupon the lower house sent 
up to the council a message, probably of remon- 
strance, with an alteration in the style of address 

1 Records, IV. 416. • /dim, IV. 714, 717. 

* Idgm, IV. 720. * Idem, IV. 717, 726. 

* The bill provided " for the payment of the wages of the Coun- 
cil and Assembly out of the funds on each Branch of the Bill.'* 
fdemf IV. 717. « Idem, IV. 727. 


EARLY ISSUES (1712-1748) 

which the upper chamber deemed an ** affront and 
indignity."^ The council accordingly refused to 
"receive any Message from the House of Bur- 
gesses" until proper satisfaction should be given 
for this injury to its dignity, and the governor at 
once dissolved the assembly. ^ 

Eight months later a new session was called, and 
the governor again urged that the public debt 
should be provided for.^ A land tax was pro- 
posed by a committee of ways and means,* but the 
lower house decided to prepare " a Bill for emit- 
ting a new Currency." '^ This contained the objec- 
tionable clause providing for the wages of the 
legislature ; and the council rejected it,^ saying 
this could not be done, "unless both Houses will 
consent to joyn in proclaiming that they are still 
resolved to persist in that little regard too often 
shewn to public faith heretofore." A deadlock 
then ensued over this measure, and the legislature 
was again dissolved.^ Shortly after these perfor- 
mances James Moir writes that the assembly is 
" pretty well versed in the American Lotteries of 
cancelling any kind of obligations by the easy 
Method of over rating a Commodity or by caus- 
ing Paper Bills of credit to be issued out where 
there is no Fund to support them."^ He adds 
that a majority of the members at the last session 

1 Records, IV. 719. « Idem, IV. 739. 

* /ifem, IV. 719, 732. « Id^m, IV. 746, 747. 
» Id^m, IV. 734. ^ Idem, IV. 752. 

* Mm, IV. 738. 8 Idem, IV. 755. 



were in favor of repudiating the paper altogether, 
and that this fact was making the currency about 
as valuable as " a little waste Paper." In April, 
1745, the governor called another session of the 
legislature. He told the members that they ought 
to give their attention to public affairs instead of 
confining all their " cares and endeavors " to get- 
ting into their own pockets " the money which was 
appropriated to sink the Public Bills and preserv- 
ing the public faith." ^ In this affair, he said, they 
had been so " Wretchedly anxious " that they had 
inserted in the bill their own names " with the par- 
ticular sums affixed to them " ; and he considered 
this conduct so indecent that he was "not suffi- 
cient master of words to bestow the proper epithets 
upon it." After some altercation between the two 
houses, the legislature at last passed a bill levying 
a tax, with the proceeds of which the outstanding 
bills should be redeemed.^ Williamson has very 
justly remarked that the policy of the assembly at 
this time " exhibits little more than repeated and 
disgusting proofs of a desire to discharge debts by 
fictitious payments." * 

But the tax levied in 1745 did not accomplish 
its purpose, and the condition of the currency was 
not improved. In 1748, exchange on London was 
^1000 colonial for ;£ioo sterling.* Governor 

1 Records, IV. 772. 

a Idem, IV. 773, 775, 779, 782, 788, 791. 

•History, II. 66. 

^ Douglass, Summary, I. 494. 


EARLY ISSUES (1712-1748) 

Johnston gives us to understand that one reason 
for the failure of the law of 1745 was the breaking 
down of the old system of paying taxes in com- 
modities.^ In any event, the treasury of the col- 
ony remained empty, and the most necessary 
public services were neglected. Then began "a 
loud and clamorous Demand for a large and 
speedy Emission of a Publick Currency,** ^ which 
was probably due to the fact that the old depreci- 
ated bills had fallen into such bad repute as to be 
almost useless " but to such as are in Debt." ^ It 
was claimed that more money was necessary in 
order to pay off arrears of quit rents, as well as to 
provide for public expenses. In 1747, some small 
expeditions sent out from St. Augustine by the 
Spanish committed depredations along the coast,* 
and this resulted in a demand for paper money 
with which to erect forts.^ Finally the governor 
yielded to the pressure that was brought to bear 
upon him, and, in violation of his instructions, 
consented to the emission of more bills of credit 
without waiting for approval of the act from the 
English authorities.^ 
The law of 1748^ was designed to make provi- 

1 Records, IV. 921-923. 

2 Id^m, IV. 922. » Idem, IV. 755. 
* Idem, IV. 922. » Idem, IV. 866. 

^ Idem, IV, 900, 915. On p. xxii of this volume the editor 
places the date of this issue at 1747. This is clearly wrong, as the 
Records show the date to be 1748. 

T The entire text of this act may be found in Iredell's Laws of 
North Carolina, 115-118. 


sion for the outstanding currency, to furnish means 
for erecting forts, and to pay off certain debts of 
the province. All bills of credit then current were 
to be exchanged in one year for new bills, at a rate 
of 7jj. old currency for is, proclamation, or new 
money. Then ;£6cxx) was set aside for construct- 
ing four forts, and the rest of the bills were appro- 
priated for paying " the several Persons to whom 
the Public is Debtor." We know that the gov- 
ernor had become at this time " the most consider- 
able " of the public creditors,^ and it is reasonable 
to suppose that the other persons included in the list 
were the members of the assembly, who could not 
have failed to urge their claims for whatever wages 
might have been due to them. If we assume that 
all of the ;£52,500 of bills of credit emitted in 1735 
were still outstanding,^ it would have required no 
more than £7000 of new bills to exchange all of 
the old at the rate of 7 J for i. Thus not more 
than ;£ 1 3,000 could have been needed to provide 
for the old currency and to construct the forts. 
But the law of 1748 authorized the issue of 
-5^21,350, so that the claims of the governor and 
assembly must have been estimated at very liberal 
figures. The new bills were made a legal tender 
at proclamation rates, "that is to say, At four 
shillings Proclamation Money for three Shillings 

1 Records, IV. 922. 

^We have no means of determining how many old bills were 
outstanding in 1748, but it is certain that the number retired could 
not have been large. Cf. Records, IV. 921. 

EARLY ISSUES (17 12-1 748) 

sterling," ^ and severe penalties were to be imposed 
upon persons who should counterfeit them. The 
tax law enacted in 1745 was repealed, and a new 
tax was levied, payable in gold, silver, or paper. 
This act seems to have discontinued the old prac- 
tice of receiving barter currency for taxes,^ a fact 
which was urged by the governor as one excuse 
for his approval of it. 

We have no means of knowing how completely 
the money loaned by the colony to its citizens had 
been repaid ; but the law of 1748 recites that " there 
are divers considerable Sums of Loan Money due 
and unpaid," and directs the county treasurers to 
take measures for collecting such arrears. Since 
it is doubtful if these arrears could have been col- 
lected any better than the quit rents were, these 
debts due to the colony by borrowers became a 
charge against the public treasury when the bills 
originally loaned were exchanged for those issued 
in 1748. And this was the result of a scheme for 
defraying the charges of government out of the 
interest of bills issued in 1729 and 1735. The law 
of 1748 brought to the English authorities loud 
complaints from the attorney general of the colony 
and others.* It was alleged, with how much truth 
we cannot determine, that the construction of forts 

^This was the correct ratio of the sterling and proclamation 
rates, and exchange would be ;^I33 proclamation to ;^ioo sterling. 
In the law of 1 7 15, exchange had been placed at fifty per cent 
advance over sterling. 

* Records, IV. 923. 

*Idem, IV. 927-928, 932, 940. 



was a mere pretence for issuing bills,^ for " it was 
made a job," and " two or three persons who were 
in the Governors interest took the bills, and employ- 
ing a few Negroes to throw up a little ground which 
they called a Fort, charged the Province to the 
amount thereof." The governor himself evidently 
feared that he would lose his official head on 
account of his violation of instructions, and accord- 
ingly wrote the English authorities a long and 
rather lame explanation of his action.* 

Thus the old currency was replaced by an issue 
of new bills, and debts contracted in the early 
decades of the century were still unpaid. North 
Carolina's issues had expanded from £,^000 in 
1 71 2 to ;£24,ooo in 1 71 5. Then the currency 
was contracted to about ;£ 12,000 in 1722, by the 
redemption of bills out of the proceeds of taxes. 
At that time the redemption of the bills ceased, 
and the currency remained stationary until 1729, 
when it was increased to ^^40,000. In 1735, the 
paper money was increased to ^^52,500, and soon 
after this it had depreciated to one-tenth of the 
value of sterling, whereas it was issued at a nomi- 
nal rating of two-thirds of sterling money. Finally, 
contrary to the law of 1735, limiting the currency 
of the money to a period of ten years, the bills of 
credit remained outstanding until 1748, when they 
were replaced by an emission of a new tenor. 
Thus North Carolina had actually redeemed none 

1 Records, IV. 932, 940. 
^Idem, IV. 919-923. 


EARLY ISSUES (1712-1748) 

of the notes issued since 1712, with the exception 
of ;£i2,ooo cancelled between 171 5 and 1722, 
while about eighty-six per cent of the original 
nominal value of the money had been repudiated 
by the law of 1748. 




The old currency of North Carolina, known as 
" Old Proc," ^ was superseded by the issue of 1748, 
which was thenceforth known as " Proc," ^ since it 
was declared to be equal to three- fourths the value 
of sterling. The ;£2i,350 of the bills of the new 
emission had, therefore, a legal value of ^^16,012 
sterling,^ or ;S>7i,093. Under the tax law of 1748, 
only £703 of the bills had been drawn in and 
destroyed* up to September, 1750. This left 
;£20,646 of proclamation money, or ;S>68,7Si, in cir- 
culation. Since the population of the colony had 
increased to nearly 90,000 by this time,^ this amount 
of money would not seem to be excessive. But it 
is to be remembered that barter currency was still 
in use in private payments ; while, as will be shown 
presently, a new form of paper medium was soon 
introduced. Moreover, the colony had in the past 
shown such a shameful disregard of all good faith 

1 Martin, II. 51. 

2 Williamson, II. 114, 115 ; McRee, I. 114-116. 

' This is £4 proclamation for £^ sterling, as declared in the 
law of 1748. 

* Records, IV. 1073. 

6 In 1752, the population was 90,000. Idem, IV., p. XX. 



that its " promises to pay " must necessarily have 
been regarded with suspicion. Therefore, the bills 
of the new emission soon depreciated.^ 

The inconveniences of the old barter currency 
had become so great that in 1748, as we have seen, 
the tax levied for sinking the bills issued at that 
time was made payable only in gold, silver, or 
paper. In 1754 and 1764, the legislature adopted 
more radical measures of reform, and, in doing 
so, originated a new kind of paper currency.^ 
Laws passed in these years provided that the old 
" rated commodities " should no longer be a legal 
tender for debts. In the future the commodities 
might be brought to the warehouses established in 
accordance with the statutes, and should there be 
inspected by public inspectors, branded, and de- 
posited for further shipment or for safe keeping. 
When this had been done, the person depositing the 
goods might receive from the inspector an amount 
of notes equal to the value of the commodities at 
official ratings. These notes were made a legal 
tender for public taxes and for private debts with 
some restrictions as to time. Thus North Caro- 
lina instituted a system of currency that resembled 

iln November, 1748, James Moir wrote that he had offered the 
new bills at ten per cent discount for cash, and could ** get nothing 
for them." Records, IV. 878. Yet, in September, 1750, a report 
of the legislature said that the bills had until then " supported the 
value they were emitted at." Idem, IV. 1073. This statement of 
the official report was intended for the English authorities, and is 
probably incorrect. See, finally, Williamson, II. 1 14. 




very closely the "tobacco notes" which were so 
extensively employed in Virginia ^ after 1730. But 
there was one great drawback with this new sub- 
stitute for money. The warehouses, where alone 
the notes could be secured upon the deposit of 
commodities, were necessarily situated in the vicin- 
ity of navigable streams. The result was that the 
frontier counties, where the complaint of scarcity 
of money was greatest, could not share in what- 
ever benefits may have arisen from the use of 
inspectors* notes; and this finally became a sub- 
ject for complaint.^ In the tidewater districts, 
however, these notes formed a very important, if, 
indeed, not the principal, part of the circulating 

In 1754, the final struggle with the French for 
the control of the Mississippi Valley began, and 
North Carolina was called upon by Governor Din- 
widdle, of Virginia, to aid in the expulsion of the 
enemy from the Ohio region.^ In this manner 
new debts were incurred, and pretexts were found 
for emitting more bills of credit. The first of these 
new issues was in 1754,* when ;£40,ooo was placed 
in circulation. That this was really an act intended 
to inflate the currency is quite certain. Governor 
Rice had died shortly before Dinwiddle's call for 
troops arrived, and Matthew Rowan was tempo- 

^See Ripley, Financial History of Virginia, 145-153. 
« Records, VIl., p. XIX. Cf. Basset, Regulators, 154. 
« Records, V., pp. X-XI. See also Records, 178. 
* Iredell, Laws, 157-163; Records, VI. 1308. 


rarily the chief magistrate of the colony. William- 
son says^ that Rowan "stooped to a bribe for 
assisting dishonest men to defraud their creditors," 
and " assented to a bill for increasing a currency 
that was already greatly depreciated." Martin 
states 2 that the inflationists insisted that more 
paper was needed, since the outstanding currency 
would gradually be contracted by the operation of 
the taxes levied for the purpose of sinking it. The 
lower house, therefore, refused to provide for the 
projected expedition unless Rowan would consent 
to the issue of another batch of paper, and desired 
to establish a loan office for the purpose of emitting 
;£8o,ooo on loan. In any event, the law of 1754 
shows, upon its very face, the intention of the men 
who framed it. This act authorized the issue of 
;£40,ooo, but of this sum only ;£i2,oco was applied 
to the expedition in question. The sum of ;£4(X)0 
was to be expended upon forts, and ;;^iooo was to 
be applied to purchasing arms. The remaining 
^^23,000 was expended for different purposes. The 
law appropriated ;£4200 "towards paying the 
public Debts of this Province," and we may hazard 
a conjecture that these debts represented among 
other things the salaries of the members of the 
assembly, for we have encountered a similar item 
in previous inflation bills. The rest of the money 
was devoted to various " charitable and pious uses 
of liberal education and public worship," such as 
a school, parish church buildings, and the like; 
1 History, II. 81. ^Idem, II. 66-67. 



all of which goes to show that almost anything 
could serve as an excuse for inflation.^ Williamson 
assures us that the " projected public school had 
no patrons, whence it followed, that the money, 
said to be given for the increase of learning, was 
converted to other uses." ^ Finally the act levied 
a poll tax and imposed duties on imported liquors, 
for the purpose of sinking the bills. 

The province learned once more that it is diffi- 
cult to support expeditions in distant regions by 
means of a paper currency. The troops sent to 
Virginia had to be supplied by direct shipments 
of pork from North Carolina, and at a greatly in- 
creased expense. Sometimes produce was shipped 
to the West Indies, and sold there for bills of 
exchange on New York, which were used for the 
support of troops sent to that province. Since 
the commodities had to be disposed of at a forced 
sale in ** a dull market," the cost of the war was 
considerably increased.* 

Governor Dobbs, who came out to the province 
shortly after this law had been enacted, received 
positive instructions to assent to no bills for emit- 

1 Upon the act of 1754 Mr. Rivers solemnly remarks : ** Rowan's 
short term of service was distinguished by liberal contributions for 
building churches and purchasing glebe lands for the support of 
ministers of the gospel." Winsor, IV. 303-304. 

2 History, II. 83. Letters from Governor Dobbs show us that 
first ;f 8000, then ;f 9000 more, and finally the whole of the money 
appropriated for churches and schools, was expended by the assem- 
bly for military purposes. Idem, V. 333, 439-440, 573. 




ting paper unless these should contain the familiar 
suspending clause.^ He proceeded to project 
schemes for establishing a copper coinage, and 
creating a loan office by means of which the 
colony would be enabled to sink the outstanding 
biUs.2 He seemed, moreover, to have the "bal- 
ance of trade'* disease in a very violent form.^ 
But, as nothing came of his proposed measures, 
we may conclude that the English authorities did 
not approve of them, for they could not have failed 
to secure support in North Carolina. The bills of 
credit issued in 1754 were not at first accepted by 
the people in the northern counties on account of 
questions that had been raised respecting the regu- 
larity of the proceedings of the legislature.* In 
1755, we learn that the currency had depreciated 
"ninety per cent below Proclamation money, at 
which it was originally issued.'* ^ Yet money was 
said to be very scarce in the southern part of the 
province. The paper currency, we learn from the 
same authority, would "neither purchase indigo, 
cash, (if such can occasionally be had,) nor bills 
of exchange." Indigo was said to be "the best 
money to be had " in the province. In the same 
year Governor Dobbs expressed ^ some apprehen- 
sion about the currency, since the assembly was 
not " inclinable " to maintain the credit of the bills 
in circulation. But in 1756, he wrote that the bills 

1 Records, V. I, 116. ^Idem, V. 573, 595. 

2 Idem, v. 324-326, 333. » Idem, V. 45 1. 
■ Idem, v. 392. • Idem, V. 440. 

M 161 


were then circulating freely in the northern coun- 
ties, so that the issue was not excessive.^ 

In 1756, military expenditures were again neces- 
sitated, and a new form of obligations was issued. 
The outlays occasioned by the war were met 
by the emission of £3600 of treasury notes.* 
These were not made a legal tender, but they bore 
interest for one year and were to be redeemed out 
of the proceeds of taxes levied for that purpose. 
The use of such treasury notes had been intro- 
duced into New England shortly after 1750, and 
thereafter many colonies employed this method of 
anticipating the collection of taxes. In 1757 and 
1758, the province made further issues of £2S,8o6, 
which raised the total amount emitted during the 
three years to ;£29,4o6.^ Finally, in 1759, £sSoo 
of these notes that had been drawn back into the 
treasury by means of the taxes levied to redeem 
them were reissued without interest, and were 
secured by a new tax. A report made in 1764 
states that, upon all the notes, interest was paid 
to the amount of ;£i370. By the year just men- 
tioned, bills had been redeemed and cancelled to 
the amount of ;£23,8o7; so that, of the £30,776 
representing the total principal and interest, only 

1 Records, V. 573. 

^Itient, VI. 1309. On the treasury notes, cf. Records, V., p. 
XLV. Williamson says that this form of obligations was issued 
because the governor refused to consent to further emissions of bills 
of credit History, II. J 14. 

* The details of all these issues may be found in a report made 
in 1 764. Records, VI. 1 309- 1 3 1 1 . 



^£6968 remained in circulation.^ This was in 
itself a legitimate and unobjectionable method of 
borrowing, and the notes were redeemed with fair 
punctuality. But, as they were thrown into a cur- 
rency that was already depreciated, they may have 
tended to increase the confusion.^ 

Meanwhile the colony was blessed with still 
another form of circulating medium. In 1757, it 
appeared that James Murray, a member of the 
council, had been issuing upon his own account a 
decidedly novel kind of promissory paper. Mur- 
ray was in collusion with Rutherford, the receiver 
general of the quit rents, and he proceeded to 
issue bills which bore on their face a promise that 
the receiver general would accept them in pay- 
ment of the rents. At first these notes were made 
receivable in only four counties, then they were 
declared a tender for quit rents in all parts of the 
province. Whenever the bills were brought back 
to Murray, he refused to accept them except for 
debts due to him or in payment for commodities 
rated at exorbitant prices. Governor Dobbs finally 
interfered with this peculiar enterprise of Murray 
and Rutherford.* 

^ These are the figures of the report of 1 764. This states that 
the ;^5SOO reissued in 1759 "neither adds or diminishes the Coun- 
try Bills." Records, VI. 1 3 10. 

* Williamson states that these notes depreciated despite the fact 
that they bore interest. History, II. 114. I have been unable to find 
other evidence upon this point, but with the bills of credit at forty 
or fifty per cent discount, these treasury notes must have depreciated. 

* An account of this transaction may be found in Records, V. 
941-944, 951. 



The bills of credit of 1748 and 1754 failed to 
rise to proclamation value, at which they were 
emitted. In 1756, a Spanish dollar,^ worth 6s. at 
proclamation rates, could not be had for less than 
Ss. in paper, which showed that exchange was at 
£177 colonial for ;£ioo sterling. Three years 
later the governor stated that exchange had ad- 
vanced to 190,2 and the same rates are reported 
for 1760.^ In 1759, a number of London merchants 
trading to North Carolina complained to the home 
government that they had suffered losses from the 
depreciation of the bills issued in 1748 and 1754,* 
and Governor Dobbs received instructions ^ to have 
the laws of those years amended in such a way as 
to make the paper a legal tender only at its actual 
value in specie. The legislature, however, asserted^ 
that it could find no merchants or English creditors 
who had suffered such losses, and therefore believed 
the complainants to be "Persons of no Weight." 
Accordingly the desired amendment was not passed. 
In this same year the legislature attempted to issue 
some more bills, but was restrained by the veto of 
the governor.^ At this time the outstanding issues 
of bills of credit were estimated at ;£50,ooo,^ or 
;S>i66,oco, while the population of the colony was 
something more than icx),oc».® This would make 
it appear that about j£i 1,000 of the ^^61,350 issued 

1 Records, V. 558. « Idem, VI. 4, 17. » Idem, VI. 305. 

* Id^m, VI. 17. 6 Idem, VI. 71. • Idem, VI. 218. 

7 Idem, VI. 149-151. Cf. Martin, II. 103. 

» Records, V. 951. • Idem, V., p. XXXIX. 



by the laws of 1748 and 1754 had been redeemed. 
But we find that bills drawn back into the treasury 
were often paid out again for current expenses,^ 
so that the notes in circulation must have fluctu- 
ated in amount from time to time. 

In 1760, renewed military outlays seemed pecul- 
iarly urgent, and Governor Dobbs ventured to 
depart from his instructions and to advise the leg- 
islature^ to issue more paper currency for the 
purpose of feeding and clothing the troops of the 
province. The lower house tried to issue the bills 
without providing a tax to sink them,^ but failed 
to carry its point. The measure finally adopted 
provided for the emission of ;£i2,ocx) in bills of 
credit* for paying military expenses, contingent 
outlays, and bounties for killing Indians. The 
bills were made legal tender at proclamation rates, 
and a poll tax was laid for the purpose of provid- 
ing for their redemption. In 1761,^ the governor 
consented to another issue of bills of credit, this 
time to the amount of ;£20,cxx), upon the same 
conditions as in the previous year. As a result, 
the outstanding legal tender bills were increased 
to about ;£ 80,000,^ and exchange on London rose 
tO;£200 colonial for ;£ 100 sterling.^ 

1 Records, v. 951. * Idem, VI, 2^4. ^ Idgm, Vi. 246, 

* Iredell, Laws, 192; Records, VI. 1309. Cf. Martin, II. 130. 

* Iredell, Laws, 198; Records, VI. 1309. Martin incorrectly 
puts the amount of this issue at ;^i 2,000. II. 147. 

« Records, VI. 615. 

^ Idem, VI. 612, 6x5. A silver dollar came to be worth more 
than gs. in paper. 



It is necessary to refer briefly to an interesting 
episode in colonial politics which was being enacted 
at about this time. For its outlays in the war with 
France, North Carolina received from Parliament ^ 
a grant of money that amounted to £77^9- Both 
the governor and assembly desired to get exclusive 
control of these funds. The latter proposed at 
one time to use the Parliamentary grant in redeem- 
ing a part of the outstanding paper, which certainly 
seems a singular thing for a colonial assembly to 
wish to do. The explanation of this action may 
perhaps be found in a statement made by the gov- 
ernor ^ to the effect that a junto of assemblymen 
had united with the treasurer in a scheme to buy 
up the paper at the current rate of exchange, £200 
colonial for ;;^ioo sterling, and then redeem it in 
specie at a rate of ;;^ 133 colonial for ;;^ 100 sterling. 
The governor devised a plan of his own for redeem- 
ing the paper, but this was rejected by the Board of 
Trade on the ground that it was liable to the same 
kind of objections as the plan advocated in the 

The whole amount of bills of credit issued under 
the laws of 1748, 1754, 1760, and 1761 was;;^93,3SO. 
In 1764, a statement of the condition of the currency 
was prepared for the legislature. This document* 

1 See Records, VI., pp. XI, XII. 

2 Idem, VI. 305. 

• IdeMf VI., p. XII. I cannot find that any part of this sum was 
used for redeeming the paper. It was probably applied to current 

^Idem, VI. 1308-1311. Cf. V^illiamson, II. 255-257, 



informs us that, up to November, 1764, there had 
been withdrawn and cancelled the sum of ;£25,286; 
so that ;£68,o64 of the bills of credit remained 
in circulation. Of the £30,776 representing the 
principal and interest of the treasury notes emitted 
between 1756 and 1759, the sum of £23,807 had 
been retired ; so that £6g68 was still outstanding. 
From these data it appears that the province had, 
in 1 764, a paper circulation of ;£68,o64 bills of credit 
and £6g6S in treasury notes, a total of £75,032. 
For sinking these bills taxes had been levied, and 
a simple enforcement of the law would retire all 
the paper within a few years. Since the popula- 
tion of the colony was now about 200,000,^ the 
£75,032 of currency ($250,000) should not have 
been a heavy burden. The fact that the appar- 
ently moderate amount of paper in circulation 
remained depreciated may seem somewhat singu- 
lar. But it is to be remembered that the trade of 
the province was not large,^ that in the frontier 

^Estimates of population in 1765 vary. Mr. Saunders estimates 
it at 125,000 in one place and 220,000 in another. Records, V., 
p. XXXIX ; Idem, VIII., p. XLV. Since the number of taxable 
inhabitants was 45,912 in 1765, the entire population may have 
been in the vicinity of 200,000. See Records, VII. 145, 289, 539. 

^ It is difficult if not impossible to present any data concerning 
the value of the imports and exports of the province. Statistics 
for North and South Carolina in 1769 may be found in Macpherson, 
III. 571-572. But it is impossible to determine accurately North 
Carolina's share of the total exports and imports of the two prov- 
inces. It may have been something less than ;^200,ooo sterling 
in 1769. But the figures would not represent the trade of the 
colony adequately even if they could be secured, because, on 



districts exchanges were effected chiefly by barter, 
and that in the tidewater regions inspectors' notes 
circulated to a very large extent. Consequently 
the $250,000 of province paper, amounting per- 
haps to $1.25 per capita, was a relatively large 
sum. Moreover, the credit of the province had 
been so greatly injured by the antics of the infla- 
tionists in the past, that any kind of a public obli- 
gation must inevitably have been held in suspicion. 
No one could foresee what amount of paper might 
be emitted in the future, and no one could feel 
certain as to the fate of the currency then in 

In 1764, Parliament passed the act^ which pro- 
hibited any colony from issuing bills of credit and 
making them a legal tender for debts. This law 
did not interfere with the issue of treasury notes, 
such as had been emitted in 1756; and in 1773, 
Parliament made an express declaration to that 
effect.^ In 1764, Governor Dobbs advised the 
assembly to call in the bills then circulating, 
which were said to be much worn and counter- 
feited, and to replace them with new ones.^ The 
assembly, however, decided that such action would 
involve needless expense, and that bills already 
paid in, if in good condition, could be exchanged 

account of the lack of good harbors, much of North Carolina's 
foreign commerce was conducted through the ports of Virginia 
and South Carolina. See Smyth, II. 98-99. 

1 Stat, at Large, 4 George III. c. 34. 

^Stat. at Large, 13 George III. c. 57. 

• Records, VL 1090. 



for any torn or defaced money that might be in 
circulation.^ Complaints of a scarcity of currency 
still continued, and, in spite of the Parliamentary 
prohibition, various petitions came to the legisla- 
ture asking for more paper money .^ Governor 
Tryon, who assumed the reins of government in 
1765, seems to have sought to gain the favor of 
the assembly by promising to use his influence 
with the English authorities to obtain their 
approval of the issue of more currency. By 
means of these promises, he secured from the 
assembly various enactments that he desired, but 
his attempts to gain the assent of the home gov- 
ernment to renewed issues of paper failed com- 
pletely.^ In the " back counties " the scarcity of 
even the paper money aggravated the causes of 
discontent that led to the uprising of the Regula- 
tors between 1765 and 1771.* These facts show 
that a currency large enough to depreciate did not 
still the complaints of a lack of money. 

In 1767, exchange fluctuated from £i7S to ;;^i82 
colonial for ;£ 100 sterling,^ and foreign bills were 

1 Records, VI. 1 154 a. 

^Idem, VII. 386, VIII. 77. In 1766, the assembly complained. 
Tdem^ VII. 417. In 1768, the assembly drew up a petition upon 
the subject Ideniy VII. 619. 

' See accounts of these transactions in Records, VII., pp. XII- 
XIII, VIII. pp. XI-XIV. See Tryon^s announcement of the 
refusal of a petition for paper money in 1769. Records, VIII. 17, 
87. Cf. Martin, II. 245. 

* Basset, Regulators, 150-155. 

*Wc have two statements for this year. Records, VII. 491, 
493. Wright, LXI., edition of 1767, says that exchange in North 



not easy to obtain in the province.^ By 1768, the 
gradual withdrawal of the old bills of credit and 
treasury notes issued prior to 1761 had reduced 
the outstanding paper to ;;^6o,i07, which was 
about ;£iS,ooo less than had been in circulation 
in 1764.^ This was not an inconsiderable contrac- 
tion of the currency for a period of four years, 
during which the number of taxables in the 
province increased from 34,000^ to 5i,cxx),* which 
indicates a large growth of population. This 
contraction, however, did not bring the bills back 
to their legal value of ;£i33 colonial for ;;^ioo 
sterling, a fact which may have been due to an 
increased issue of inspectors' notes, or to the dis- 
turbances caused by the troubles with the Regu- 
lators. In 1769, Governor Tryon placed the 
amount of outstanding "proclamation bills" at 
-^^58,535,^ a statement which corresponds nearly, 
but not exactly, to the figures above presented. 
Late in 1768, it became necessary to defray the 

Carolina had been at 145 shortly before 1767. This must be an 
error, since we have trustworthy evidence from North Carolina of a 
higher rate. 

1 See letters of McCulloh to Iredell, in McRee, I. 42-43. 

*See a report made in January, 1768. Records, VII. 215. 
Here the total amounts redeemed up to date are stated at ;f37,i62 
of bills of credit and £26,SS7 of treasury notes. Subtracting these 
sums from the total amounts issued (viz. ;f 93,350 of bills of credit 
and ;f 30,776 of treasury notes), we have left in circulation 
£s6,iSS of bills of credit and ;f39i9 of treasury notes. 

^Idem, VI. 1040. 

^ Idem, \ll, 539. 

^Idem, VIII. 12, 212. 



expenses of raising a body of troops which had 
been called out by the governor in order to sup- 
press an uprising of the Regulators, and the 
assembly seized upon this as a good opportunity 
to secure the issue of more currency.^ The cost 
of raising the troops was only ;;^4844,^ but the 
assembly straightway passed a bill for the emis- 
sion of ;;^30,ooo in notes ^ which were to be used 
for a variety of purposes, including of course the 
payment of the wages of the members of the 
legislature. But the governor and council refused 
to consent to this measure. In the end a bill was 
passed providing for the issue of ;£20,ooo of 
debentures, which were to be redeemed out of the 
proceeds of a poll tax of two shillings.* The notes 
were not, however, to be a legal tender ; ^ and the 
English authorities finally approved of the act as an 
emergency measure.^ Although these debentures 
found their way into circulation, the assembly 
proceeded in 1770 to pass a valuation act,^ which 
prohibited sheriffs from selling property taken 
in executions unless it realized two-thirds of the 
valuation set upon it by a board of appraisers. 
This was defended, of course, upon the ground of 
the scarcity of money.® In the spring of 1771, 

^On this incident see Basset, Regulators, 185. 
^Records, VII. 887-888. 
• Idem^ VII. 9 1 5-9 1 6. 

^^Idem, VII. 917, VIII. 5, 6, 9. Cf. Martin, II. 249. 
» Records, VIII. 9. « Idem, VIII. 266-267. 

' Acte of N. C, 485-486; Martin, II. 271. 
•Sec Records, IX., p. XV. 


another body of troops had to be raised in order 
to suppress the Regulators ; and, in order to 
meet the expenses incurred in this manner, one 
of the treasurers issued notes to the amount of 
;£6ooo,^ which were a further addition to the 
currency of the province. These treasurer's 
notes proved to be especially objectionable, since 
they bore but a single signature and were readily 

In July, 1770, ;;^58,S3S of the old " proclamation 
money *' was outstanding, besides the ;£20,ooo of 
certificates, or debentures, issued in 1769; and all 
this currency was said to be in brisk circulation.* 
^ In August, 1 77 1, Josiah Martin, Governor Try on's 
successor, reached the colony.* He found himself 
confronted with a large amount of unpaid claims 
caused by Tryon's expedition against the Regu- 
lators, while the outstanding paper currency was 
becoming discredited by the activity of the counter- 
feiters,^ who had placed a large quantity of spuri- 
ous bills in circulation. He urged the home 
authorities to consent to an emission of new cur- 
rency, which should be used for replacing the old 
bills and for defraying the debts recently incurred 
by his predecessor ; ^ and was told that this could 
be permitted provided the notes were not made a 
legal tender.^ The assembly complained of the 

1 Records, VIII., p. XXIX. Cf. WiUiamson, II. 275. 

2 Records, IX. 18. */dem, VIII. 212. 
* Idgm, IX., p. III. » li^m, IX. 18. 

« Idem, IX. 19. ' Idem, IX. 65. 



difficulty of paying the debts of the province 
without resorting to the issue of paper,^ and drew 
up a petition to the Crown, praying that permis- 
sion might be given to make the currency a tender 
for debts.2 If this could be allowed, the assembly 
pledged itself to " frame this Law, so as to prevent 
British creditors from suffering, should such cur- 
rency depreciate in value/' In this quotation the 
italics are the author's, and the reader will hardly 
fail to be struck by the implied willingness of the 
legislature to rob domestic creditors. A bill was 
then passed providing for the issue of ;;^ 120,000 
in debenture notes,^ but this was vetoed by Gov- 
ernor Martin.* The governor wrote to Earl 
Hillsborough ^ that a majority of the delegates 
'* from the Southern district in which the people 
are almost universally necessitous and in debt,^ and 
whose policy it has been to overflow the province 
with paper money," advocated this large emis- 
sion of new currency. He stated also that the 
" minority from the Northern districts as warmly 
opposed this system." In the end Martin con- 
sented to the issue of ;£6o,ooo of " stamped de- 
benture notes," equal to proclamation money.^ 

1 Records, IX. 142. « Idem, IX. 213. Cf. VII. 619. 

^Idern, IX. 197. * Idem, IX. 222. » Idem, IX. 76. 

'This southern district was thinly settled and in much less com- 
fortable circumstances than the northern and eastern counties. In 
1755, Abercrombie reported that money was especially scarce in 
"the Southward parts of the Province." Idem, V. 451. 

' The text of this act may be found in Acts of North Carolina, 
496-497. See also Records, IX. 76. 



The notes were not made a legal tender, and an 
annual tax of two shillings per poll for ten years 
was levied upon the province ^ in order to provide 
for their redemption. By means of these bills 
Governor Martin planned to retire the notes issued 
during Tryon's administration, and he hoped that 
such action would prevent the new currency from 
depreciating.^ His course in this matter was 
approved by the English authorities.^ Martin 
tells us* that the currency thus authorized was 
placed in circulation much sooner than he had 
expected, on account of " the alacrity with which 
the base and false substitute of specie is manufac- 
tured here." He adds that the new bills had 
affected exchange far less than he had appre- 

At this point it is necessary to refer to the few 
available facts concerning the coin cmrency of 
North Carolina. The law that provided for the 
issue of bills of credit in 1748^ declared the 
paper to be a legal tender as proclamation money, 

^Thus one-tenth of the bills was to be sunk each year. In 
order for a poll tax of two shillings to supply the means for doing 
this, the number of taxables must have been 60,000. This would 
indicate a population of about 250,000. See Records, IX., p. XV. 

^Idem, IX. 77. ^Idern, IX. 275, 278. 

*/^^»f, IX. 260. ^Idem, 

* Prior to 1748 the laws were not uniform. The bills issued in 
1 71 5 were made a tender at ;f 150 colonial for ;^ioo sterling, the 
same as the barter currency. Proclamation rates were £iZZ ^^ 
;f 100 sterling. Records, III. 178. Then the act of 1729 declared 
20X. of the new paper equal to 15 dwts. of silver. Hawks, II. 284. 
Thb made silver worth 26.6^. per ounce, while the proclamation 



or as sterKng money at proclamation rates.^ But, 
as we have seen, the currency did not retain its 
nominal value, and depreciated as soon as issued. 
At the rate fixed in 1748, ;£i33 of the paper 
ought to have equalled ;£ioo sterling; but ex- 
change rose in a few years to ;£i90 and even 
;^200.2 By 1767 it seems to have fluctuated about 
;£i8o colonial for ;£ 100 sterling.^ We know that, 
as early as 1756, a Spanish dollar exchanged for 
8s. of the paper,* whereas the proclamation value 
of this coin was only 6^". When exchange finally 
settled down to ;;^i8o, or perhaps less, a dollar 
came to be rated, "by long usage," at 8s. ;^ for 
with the paper currency worth £177^ colonial for 
;^ioo sterling, this valuation of the dollar would 
just keep it in circulation.^ This seems to furnish 
an explanation of the fact that in North Carolina 
the Spanish dollar came to be rated at 8s. In 
1767, a bill giving a legal rating to gold and 
silver coins was introduced in the legislature,® 
but it does not seem to have become a law. The 

rating was about 6s. io}</. The rate indicated the depreciation of 
the paper. 

1 Iredell, Laws, 117. Cf. Williamson, II. 39. 

"Records, V. 451, VI. 4, 17, 305, 612, 615. 

«/^iPW, VII. 491, 493. 

*/^^w,V. 588. 

•Note Williamson, II. 115. 

• Thus in 1767 exchange is quoted at from ;f 175 to ;^i82. Rec- 
ords, VII. 493. 

^ Such an overvaluation of the dollar would make 20s. of silver 
of the same nominal value as 20s. of paper. See tables in Wright, 4. 

* Records, VII. 593. 



next year a law was passed "to encourage the 
Importation of British Copper Halfpence, and for 
making them a Tender for the Payment of small 
Debts," but this was disallowed by the Crown.^ 

Various acts passed by the assembly give the 
reader the impression that gold and silver circu- 
lated in the province to some extent at least. In 
1729, gold and silver were included among the 
rated commodities.^ Seven years later, a law pro- 
viding for the collection of quit rents made gold 
and silver payable at proclamation rates.^ The 
same thing was done in tax laws enacted in 1745 
and 1748.* After the bills of the new tenor came 
to circulate at a relatively stable exchange of ;;^ 175 
to ;£i82, the assembly, as we have seen, tried to 
enact a law^ making gold and silver legal tender 
at fixed ratings. Such measures would hardly 
have been enacted if there had been no specie 
in the province. In 1766, when Governor Tryon 
mentions the subject of the scarcity of specie,® he 
does not say that there is none in the colony. Gov- 
ernor Glenn of South Carolina wrote to Governor 
Dobbsin 1755^ that, since that province had retired 
a considerable part of its paper, " gold and silver 
begin to take up their abode with us, two-thirds of 
all Payments being now made in those Metals." 
Specie must have circulated to some extent in 

1 Acts of N. C, 449. * Records, VII. 593. 

2 Hawks, II. 286. « Idem, VI. 144, 201. 
« Records, IV. 185. ' Idem, V. 378-379. 
* Idem, IV. 781; Iredell, Laws, 117. 



North Carolina after the paper currency came to 
have a relatively stable value. In 1770, Wynne 
wrote concerning both Carolinas :^ " A very incon- 
siderable quantity of English money circulates in 
either province; the current cash consisting almost 
wholly of Spanish dollars and pistoles." 

It will be recalled that, in 1760 and 1761, the 
province made two emissions of bills of credit, 
amounting in the aggregate to ;;^32,ocx). For 
sinking each issue a poll tax was levied,^ and it 
was pledged that these taxes should continue in 
operation until both of the emissions should be 
redeemed. In 1768, after efforts to secure new 
issues of paper had failed,^ the assembly voted to 
repeal these taxes, alleging that enough money had 
been collected to suffice for the purposes for which 
the taxes were laid.* Governor Tryon, however, 
vetoed this act,^ the real purpose of which was to 
lighten taxation and prevent the reduction of the 
number of bills then in circulation. The fact is that 
the tax system of the colony was both wrong in 

1 Wynne, II. 301. 

* Iredell, Laws, 192, 198. 

* Basset gives an account of this transaction. Regulators, 152, 


* Records, VII. 922, 923. This was not correct. The total 
amount of bills of credit of the emissions of 1748, 1754, 1760, and 
1 761 that was cancelled between 1761 and 1768 was less than 
£2^fiOO. Idem, VIII. 215. Many of these bills were, doubtless, of 
the emissions of 1748 and 1754. 

^ Idem, VII. 986. In 1771, Governor Martin stated that these 
taxes were suspended by resolves of 1768. Idem, IX. 231. Com- 
pare an act passed in 1770. Iredell, Laws, 254. 
N 177 


principle and administered with a laxity that is 
appalling. Nearly all the taxes levied in North 
Carolina took the form of uniform assessments 
upon polls, in the list of which adult white males and 
adult colored males and females were included.^ 
At the time of which we are writing, the principal 
auxiliary form of taxation was a light duty upon 
imported spirits. Such a crude system of raising 
revenue necessarily produced the grossest inequali- 
ties, and these were made worse by bad adminis- 
tration. The taxes legally in force in 1761, and 
pledged to the redemption of the outstanding 
paper, ought to have brought in about ;£8ooo 
annually.2 But the sheriffs were exceedingly lax 
in making collections, and were both negligent and 
dishonest in turning money over to the treasurers 
of the province; while the duty on liquors was 
largely evaded by reason of the extensive scale 
upon which smuggling was practised. In some 
years the sheriffs turned in not more than one- 
third of the amounts levied,^ and, in 1770, it was 
found that in every county of the colony there was 
at least one defaulting sheriff. In the year last 
mentioned, the aggregate indebtedness of all the 
sheriffs was ;£64,ooo.* Thus there was good rea- 
son for the belief in 1768 that the burden of taxa- 

1 On this subject see Basset, 72 ; Williamson, I. 122 ; Records, 
VII., p. XI, X., p. XXV. In 1 713 and 1715 a tax had been laid 
upon land, but this was not permanent. Records, III. 189, 485. 

2 Records, V., pp. XLV, XLVI. 
» Idem, VII., p. XVII. 

* Idem, VII., p. XVII, IX. 68. See Wheeler, 311. 



tion should be lightened, but the proper remedy 
would have been to hold the sheriffs to a strict 
accountability. This would have lightened taxa- 
tion without a violation of the public faith. 

In 1 77 1, the assembly turned its attention to the 
taxes levied in 1748 and 1754 for the redemption 
of the bills of credit emitted in those years. The 
clerk of the committee of accounts submitted a 
report which purported to show that, of ;£6i,3SO 
of bills of these two emissions, ;£S3,I04 had been 
burned ; while there was in the hands of the treas- 
urers a sum of money amounting to ;£i 2,585, which 
would more than suffice to redeem the rest of these 
issues.^ Accordingly the assembly voted to repeal 
the taxes levied in 1748 and 1754, on the ground 
that they had accomplished the purpose for which 
they had been imposed.^ Then Governor Martin 
vetoed the bill, and denounced it as a fraudulent 
measure. The assembly, however, anticipating 
this action, prepared a resolution that would have 
had the effect of discontinuing the collection of 
the taxes ; but the governor, learning of this pro- 
posed action, dissolved the legislature before the 
obnoxious resolution could be entered upon the 
records.^ After this, the speaker of the lower 
house informed the provincial treasurers of the con- 
tents of the resolution, and these officials omitted 

1 Records, IX. 166. 

* Idem^ IX. 167. See accounts of this afiair in Records, IX., pp. 
XVI, XVII; Sikes, 11-14. 
» Records, IX. 232, 233. 



these taxes from the lists ^ sent out to the sheriffs 
for collection. Thereupon, the governor issued a 
proclamation requiring* the sheriffs to make the 
collections as usual, and threatening to have them 
sued for any amounts that they should fail to col- 

Although the assembly's statement of the case 
seems to be fair and plausible, the governor was 
probably right in his criticisms upon its action. 
The ;£53,i04 of bills said to have been cancelled 
were probably not exclusively bills of the two emis- 
sions of 1748 and 1754. The governor said^ that, 
in the accounts of the bills that had been cancelled, 
no pains were taken to distinguish between bills of 
the four emissions of 1748, 1754, 1760, and 1761. 
This is certainly the case in the report submitted 
in 1770,* and was probably true of the report of 
1 77 1. The facts then would seem to be that bills 
amounting to ;£93,35o had been emitted in 1748, 
1754, 1760, and 1 761 ; and that ;£53,i04 had 
been redeemed by 1771, while ;£i2,585 more 
were said to be in the treasury but not yet de- 
stroyed. This left a considerable quantity of the 
old legal tender paper still in circulation,^ and bills 
of the emissions of 1748 and 1754 were undoubt- 

1 Records, IX. 233, 234. • Idetn^ IX. 231. 

* Identy IX. 229, 234. * Idem, VIII. 215. 

• The governor said that ;f 42,800 in legal tender paper was still 
outstanding. Idem, IX. 231. This is about the difference be- 
tween the ;£'93»350 representing the four emissions and the ;f53»i04 
said to be burned. 



edly outstanding when the legislature proposed to 
repeal the taxes levied for redeeming the two issues 
just mentioned. But there is still another point to 
be considered. The governor stated that in 1768 
the poll tax levied for sinking the bills issued in 
1760 and 1 76 1 had been illegally suspended by a 
resolution of the assembly.^ If it is true that the 
assembly circumvented Tryon's veto of the bill 
suspending the taxes of 1760 and 1761 and suc- 
ceeded in abolishing those taxes, then its action in 
1 77 1 was quite as "fraudulent" as Martin repre- 
sented it to be ; for the repeal of the taxes levied 
in 1748 and 1754 would have taken away the only 
remaining funds available for redeeming the bills 
of credit. 

In 1 77 1, it appears that about ;£40,ooo of the old 
legal tender notes were still in circulation,^ and 
during that year the ;^6o,ooo of debenture notes 
authorized by Governor Martin were added to the 
currency of the province.^ This made a total of 
about ;<C 100,000 of notes,* while the population 

1 This incident is discussed by Martin, II. 291, 292 ; Williamson, 
II. 164-166 ; Jones, 74-75, loi. 

*This is the difference between the ;f 93,350 emitted in 1748, 
1754, 1760, and 1761, and the ;f 5 3, 104 said to be burnt in 1771. 

* These debenture notes replaced all the notes issued in Tryon's 

*I assume that practically all the £3^*77^ o^ treasury notes 
issued between 1756 and 1759 had been redeemed. Of this sum, 
;f 26,857 was reported burnt in 1770. Records, VIII. 215. The 
;f 100,000 in circulation in 1771 was equivalent to 1^333,000, at 
its nominal value. With exchange at 177, it would be equivalent 
actually to ;|S250,ooo. 



of North Carolina was about 250,cxx).^ No more 
paper money was issued during the colonial period, 
but in 1774 we find the assembly petitioning for 
permission to emit bills of credit and make them a 
legal tender .2 Inspectors* notes probably continued 
to be extensively employed as currency, and a 
law was passed in 1770 making special regulations 
concerning the receipt of indigo notes for taxes.^ 
The ;£6o,cxx) of debenture notes issued in 1771 
do not seem to have affected exchange materially,* 
and the condition of the currency remained about 
the same until the opening of the Revolution. In 
July, 1772, Iredell stated that exchange was at 
£160 colonial for ;£ 100 sterling,^ which indicates, 
perhaps, some appreciation of the currency .• In 

1 Records, IX., p. XV. « Acts of N. C, 461-462. 

« Martin, II. 325. * Records, IX. 260. 

*McRee, I. 115. Smyth states that in 1774 exchange was at 
;f 133. Smyth, II. 99. But this was certainly a mistake, and was 
probably due to an oversight of the fact that "proclamation 
money" in North Carolina meant a rating of the dollar at eight 
shillings instead of six. 

* With the rating of a dollar at &., the nominal par would be 
;^I77. But at this time the pound sterling was in reality a certain 
quantity of gold, because that metal had been overvalued by Eng- 
lish law, and silver was being displaced. Therefore Spanish silver 
coins when shipped to England would have a value that changed 
whenever the ratio of gold to silver varied. The legal rating of 
silver was 5J. 2d. per ounce, which made the dollar worth 45. 6d. 
But silver was sometimes more valuable than this, so that the 
dollar became worth 45. &/. When this happened, the actual par 
of exchange would fall from £iyy to £171$ with the dollar rated 
at Ss, See Wright, 4. Besides this, it must be remembered that 
the English gold coins were in very bad condition, having been 



^77Sf at least ;^40,ocx) of the debenture notes issued 
in 1 77 1 must have remained outstanding;^ and, in 
addition to this, a considerable quantity of the 
bills of credit was still in circulation.^ 

subject to great loss from abrasion and clipping. The mint price 
of gold was 77.87J. per ounce ; but gold bullion in the market 
often sold for as much as Sos., because that sum of money was 
paid in light-weight gold coins. See Smith, W. of N., I. 43-44 ; 
McCulloch, 318. In 1773, it was decided that the gold coins 
weighed on the average from 2.5 to 5 per cent less than they should 
have done ; and ;^3^i 8,000 of selected coins showed a loss of nine 
per cent. 34 Journals of House of Commons, 734-735. Such a 
condition of England's gold coins might lower exchange in North 
Carolina several per cent below 171. Finally, the cost of shipping 
and insuring specie was much more than at the present day. In 
1760, the cost of freight and insurance was over four per cent in 
Massachusetts. Acts of Mass., IV. 541. If exchange happened 
to be in favor of North Carolina in 1772, the rate would be 
lowered by an additional amount. Perhaps, in this manner, we 
can account for Iredell's statement. 

^The tax levied to redeem them was supposed to bring in 
;f 6000 annually for ten years. See Acts of N. C, 496-497. The 
tax would have redeemed not more than ;f 24,000 by 1775, if 
thoroughly and punctually collected. Probably it brought in con- 
siderably less than that sum. 

^ We know that some of these legal tender bills were in circula- 
tion as late as 1778. McRee, I. 389, 406. 



THE LAST ISSUES (1775-1788) 

North Carolina was badly prepared to enter 
the struggle for independence. Her credit had 
been impaired by previous violations of the public 
faith; and she had a considerable quantity of 
paper in circulation, so that the margin of safety 
for future issues was a narrow one. In April, 
177s, the final message^ of the last royal governor 
called the attention of the legislature to the fact 
that the treasury was empty, while large demands 
of various creditors were unsatisfied and the dues 
of public officers were unpaid. The assembly con- 
templated^ "with great concern" the "exhausted 
state of the public funds," and said that this unfor- 
tunate condition was not due to its own misconduct. 
Owing to a dispute between the governor and the 
legislature, no list of taxables had been drawn up 
since 1772, and consequently no taxes had been 
collected for more than two years.^ But more 
than this, the province had no system of taxation, 
except a primitive poll tax and a few imposts on 
commerce. Even these were badly administered, 

^Records, IX. 1 195; Jones, 166. 
2 Records, IX. 1204; Jones, 169. 
•Records, IX. 1204. 


THE LAST ISSUES (1775-1788) 

as is shown by the fact that the tax collectors in 
1770 were indebted to the province for ;^64,ooo.^ 
The manner in which county officials sometimes 
attended to their duties is shown in a letter written 
about 1772, in which the writer states that, in his 
county, " no County tax is laid, no list of taxables 
is returned, no Sheriff qualified," so that "all is 
confusion, anarchy, and uproar." ^ Under such 
conditions, a debt of ;£6o,ooo was considered 
almost beyond the resources of the province in 
1771,^ when North Carolina had a population of 
about 25o,(X)o; and an annual tax of ;£6ocx), 
levied in order to sink this indebtedness,* was 
probably regarded as a heavy burden. Under the 
most favorable circumstances, the development of 
an adequate system of taxation would have been 
difficult in such a sparsely settled colony ; ^ but the 
long-continued use of paper money, for the payment 
of both ordinary and extraordinary outlays, greatly 
impeded this process. Why should the people 
submit to taxation, if the payment of one debt by 
creating another is to be considered a proper 
method of meeting public obligations ? 

When a provincial congress met in August, 1775, 
a committee of ways and means reported^ that the 

1 Records, VII., p. XVII. 
«McRee, I. 75. 

»See Records, IX., pp. XII-XIV. 
*ActsofN. C, 496. 

* These facts are well stated by Williamson, in the American 
Museum f II. 122, 123, 127. 

•Records, X. 183-184; Jones, 222-223. 



colony was in debt to various creditors; that no 
money "on the Contingent fund" was in the 
hands of the southern treasurer; and that no 
information could be secured concerning the con- 
dition of the treasury of the northern district. 
The committee recommended that measures should 
be adopted to recover the ** diverse large sums of 
money due from sundry sheriflfs,"^ and that the 
money collected since 1771, under the tax laws of 
1748 and 1754, should be returned to the taxpay- 
ers. In order to provide the funds needed for the 
defence of the province, the congress then voted * 
to emit $125,000 in bills of credit. These were to 
be a legal tender at the rate of eight shillings for 
a dollar ; persons who should " speak disrespect- 
fully" of the bills or offer a premium for specie 
were to be treated as enemies of their country; 
and finally a poll tax of two shillings, running for 
a period of nine years, was levied for the purpose 
of sinking the currency. This tax, however, was 
not to be collected until 1777. Thus the war was 
to be carried on for 1775 and 1776, if it should 
last so long, without resorting to the unpleasant 
expedient of paying taxes. 

In April and May, 1776, more money had to be 
raised, and the congress issued^ ;£soo,ooo more of 

1 Acts were subsequently passed for this purpose. See Iredell, 
Laws, 334, 386. 

2 Records, X. 194-196; Jones, 223. Martin incorrectly places 
the amount of bills at |(i50,ocx). History, II. 365. 

B;^ 1 00,000 was authorized in April and ;^400,ooo in May. Rec- 
ords, X. 532 573. See Martin, II. 3S6; Jones, 254, 257. 


THE LAST ISSUES (1775-1788) 

its paper, or ;J! 1,250,000. These bills were emitted 
upon the same terms as the issue of 1775, and 
were to be redeemed by a poll tax which should go 
into operation in 1780. Jones states that these bills 
were badly engraved on a poor quality of paper, 
and that they were extensively counterfeited. In 
1777, a tax of one shilling on every ;^ioo of 
property was established for the purpose of meet- 
ing county expenses,^ but no such provision was 
made for the needs of the state. In 1778, more 
funds were required, and the legislature authorized 
the emission of ;£85o,ooo of paper, or ;J!2, 12 5,000.^ 
Some of these bills were to be used for replacing 
former issues, which were much counterfeited; 
and the rest were to be applied to defraying mili- 
tary expenses. Mr. McRee says that no adequate 
fund was provided for sinking this last emission, 
and that the legislature was unwilling to hazard 
its popularity by levying sufficient taxes to place 
the credit of the state upon a proper basis.* 

In 1779, however, the legislature applied to 
other purposes that portion of the bills issued in 
the previous year which was to have been ex- 
changed for the emissions of 1775 and 1776.* By 
this enactment the redemption of the two early 
issues was postponed until 1780, and later laws 

1 Iredell, Laws, 348-349. This tax was modified in 1779. Idem^ 
378. Iredell wrote that the action of the assembly in 1777 left " a 
faint glimmering of hope." McRee, Life of Iredell, I. 359. 

2 Iredell, Laws, 360-361. 

• life of Iredell, I. 404. * Iredell, Laws, 369. 



provided for a further postponement for four 
years.^ Meanwhile the depreciation of the paper 
was increasing at an alarming rate. The official 
tables established in 1783 recognized no deprecia- 
tion before March, 1777, but these figures are 
notoriously incorrect. The continental paper 
began to decline in value as early as the middle of 
1776, and this process could not have been much 
longer delayed in North Carolina. By January, 
1778, a depreciation of 3 J for i is recognized by 
the official tables.^ In this year, Iredell urged the 
grand jury at Edenton to proceed against all per- 
sons guilty of offering a premium for specie.^ He 
stated that it was a common practice to " make a 
difference " between paper issued by the colonial 
government and that issued by the state, or be- 
tween continental paper and the bills emitted by 
North Carolina. By January, 1779, six dollars in 
paper were worth only one in specie ; and a year 
later the rate of depreciation had increased to 
32 for I. 

Meanwhile the evils of counterfeiting had become 
so great, in spite of the severe penalties prescribed 
by the laws,* that the legislature appointed in each 
county inspectors of the currency.^ Persons who 
should be offered any of the bills were authorized 
to bring them before these officers, who were to 
stamp all counterfeits. When the assembly was 
convened in April, 1780, the state currency had 

1 Iredell, Laws, 401-414. ^Idem, 452. «McRee, I. 389, 

* Iredell, Laws, 389-390. * Idftrtf 400. 


THE LAST ISSUES (1775-1788) 

depreciated ^ to one-fiftieth of its nominal value, if 
not less; while the continental money had been 
practically repudiated by the action of Congress 
on the eighteenth of the preceding month. Up to 
this time taxation had been practically suspended 
in the state, except for the small sums that may 
have been raised for county purposes. This 
assembly levied a tax for the year 1780;^ but 
it also emitted bills of credit to the amount of 
;£i, 240,000, or $3,100,000, and made this money 
a legal tender at its nominal value.^ This law 
contained one section which authorized the gov- 
ernor to emit "such further Sum or Sums" as 
might be needed during the recess of the assem- 
bly.* But the paper money had become so nearly 
worthless that the war could no longer be carried 
on through such an agency, and in September ^ it 
was necessary to call for a specific tax payable in 
provisions. This was afterwards described by 
Governor Johnston as the "most oppressive and 
least productive tax ever known in the State." ^ 
Yet, in 1781, "a money and specific Provision 
Tax " was imposed.^ 

By the opening of 1781, one dollar of the paper 
issued by North Carolina was worth less than one- 

^ Iredell, Laws, 452. 

«/^«, 397. 

^Idem, 397-398. 

* Of the laws passed at this session Iredell wrote, " They are 
certainly the vilest collection of trash ever formed by a legislative 
body." McRee, 1.446. • Elliot, IV. 79. 

^Iredell, Laws, 405. ^ Iredell, Laws, 417. 



half of one per cent of its nominal value.^ Yet 
the legislature proceeded to authorize the issue of 
$26,25o,cxx) of notes in order to raise and equip 
four battalions of continental troops.^ These notes, 
or certificates, were payable in 1782, and bore 
interest at six per cent It has been impossible 
to determine whether they were made a legal 
tender,^ but they must have found their way into 
circulation, as such certificates usually did. In 
February of this year, the salaries of judges were 
fixed at ;£20,ooo annually;* and by December, 
$725 in paper was worth but $1 in specie.** In 
the early months of the year the currency was so 
nearly worthless that the legislature provided that 
all future purchases on the part of the state should 
be made at specie rates,^ and paid for by issuing 
certificates that should be redeemed in gold or 
silver. But this was little better than a mere 
impressment of supplies, and added to the paper 
of the state a new form of indebtedness. At the 
same time provision was made for adjusting tem- 
porarily old claims against the state by appointing 
district auditors to examine the demands of credit- 
ors and to issue certificates for the amounts due.^ 

1 Iredell, Laws, 452. * Idem, 409-410. 

* Iredell does not print all the sections of the law. 

*McRee, I. 488. In 1780, Iredell paid ;^i6o per day for board 
and lodgings. Idem, I. 472. 

* Iredell, Laws, 452. • Idgm, 41 2. 

'^ Idem, 410. The law fixed the prices that should be allowed 
for each article furnished to the state. These prices were such as 
prevailed in the period of inflation, as 32^. per pound for beef. The 


THE LAST ISSUES (1775-1788) 

As the paper currency approached a condition 
of utter worthlessness, it circulated with increasing 
difficulty, and finally collapsed. At the same time 
specie began to return to circulation. This process, 
of course, was attended with considerable incon- 
venience ; and, for a time, it seems to have been 
necessary to resort to barter.^ In May, 1780, Ire- 
dell received $19 in silver.^ By 1781 and 1782 
specie became plentiful, and remained so until it 
was once more replaced by paper.^ In 1783, the 
legislature repealed all acts making the old cur- 
rency a legal tender, and established an official 
scale of depreciation for use in the settlement of 
debts contracted during the period of inflation.* 
At the same time valuations were established for 
foreign gold and silver coins, the dollar being rated 
at eight shillings. This valuation of the dollar 
was a mere confirmation of the rate at which it 
had previously been received.** 

certificates, therefore, were placed on the level of the depreciated cur- 
rency; and, accordingly, they were made receivable for taxes at the 
rate of 200 for I. Idemt 417. 

^Thus in 1780 Iredell's sister is found trying to barter sugar for 
chickens. McRee, I. 517. 

2 Iredell, Laws, 451. 

• In 1787, Willianison wrote that money had been " very plenty " 
three years before. American Museum^ II. 107. In 1788, speakers 
in the state convention commented on the abundance of specie 
after the close of the paper-money period of the war, and said it 
remained plentiful until paper was issued again. £lliot, IV. 90, 
189. * Iredell, Laws, 452-453. 

*Thus in 1779 an act relating to confiscated debts, which were 
contracted in specie, placed exchange at 175, which shows the 


By 1780, North Carolina began to levy taxes for 
state purposes,^ as we have seen. The exigencies 
of the times had compelled the legislature to sup- 
plement the assessment of polls by a tax on prop- 
erty ;^ and, in 1782, a law was passed providing for 
the assessment and collection of poll and property 
taxes.^ Real estate was the principal item of prop- 
erty taxed,* and the assessments were commonly 
called land and poll taxes.** In 1785 and 1786, 
other imposts were added to the revenue system 
of the state.^ The taxes introduced in 1780 did 
not prove effective at the start, and North Caro- 
lina was able to give but little financial support to 
the federal government. Prior to December, 1779, 
the state seems to have paid nothing on her quotas 
of the requisitions of Congress. Then, between 
that month and June, 1780, North Carolina paid 
$2,380,000 in depreciated paper, for which she 
received a credit of $73,304 in specie,'' an amount 
that was perhaps fifty per cent more than the bills 
were actually worth.® In 1780, Congress asked the 

dollar to be rated at Ss, In 1782, Morris reported a rating of Ss. 
Sparks, Diplomatic Correspondence, XII. 91. 

iSee Iredell, Laws, 397, 405, 417. 

«See laws passed in 1777 and 1779. Idem, 348, 378. 

«/(ir»f, 429-430. 

* See State Papers, Finance, I. 435-436. 

^See Letters to Washington, IV. 69; American Museum^ II. 
122. ^ Iredell, Laws, 519, 586. 

^ State Papers, Finance, I. 62. 

^ This sum was rated according to the tables of depreciation es- 
tablished by Congress, a scale which understated the extent of the 
deterioration of the paper. Cf. Bullock, 132-133. 


THE LAST ISSUES (1775-1788) 

state to furnish $i,ocx),ocx) per month for twelve 
months in order to sink its quota of the continental 
bills. Upon this requisition ^ North Carolina paid 
nothing until 1789, when she turned in $$,061,061 
in paper, for which a credit of $126,671 ^ in specie 
was allowed. From 1781 to 1788, Congress called 
upon the state for $463,^06 in specie and ;J!674,739 
in indents. Of these sums North Carolina paid 
only $48,626 in specie.^ This is a poorer showing 
than was made by any other state except Georgia. 
The Revolution left North Carolina with a large 
debt consisting of depreciated paper* and certifi- 
cates of many kinds issued at various times to the 
public creditors.^ By 1783, the paper currency had 
disappeared from circulation, and the state was 
upon a specie basis after seventy years' experi- 
ence with a fluctuating medium of exchange. 
Then began a renewed agitation for an issue of 
bills of credit. In May, 1783, the legislature voted 
to issue ;£icx),ooo, or i!2 50,000,^ ostensibly in order 
to pay continental soldiers and officers of North 
Carolina ; ^ but one clause of the act provided for 

1 See Bullock, 158; Williamson, II. 281-282. 

^ State Papers, Finance, I. 59. This paper was valued at 40 for 
I, which was several times as much as it was worth. The continen- 
tal paper was funded in 1790 at 100 for i, and had been as low as 
500 or 1000 for I. 

« Idem, I. 54-57. 

* Writings of Madison, I. 513. 

• Williamson has described this part of the debt. American 
Museum, II. 126. • Iredell, Laws, 443. 

' Note title of act, and compare McRee, II, 63. 
O 193 


the payment of members of the assembly out of 
the new bills. The paper was made a legal tender 
in all payments, and 2^ tax was levied for its re- 
demption. Moreover, the property recently con- 
fiscated by the state was pledged as security for 
this new emission. A contemporary writer charac- 
terized the assembly that passed this act as a " set 
of unprincipled men, who sacrifice everything to 
their popularity and private views." ^ A few 
months later the inhabitants of Edenton entreated 
the legislature to make no further issues, and to 
redeem the last emission as quickly as possible.^ 
Instead of doing this, the legislature soon broke 
its solemn promises, and the money ^ derived from 
the confiscated estates was " converted to another 

The bills emitted in 1783 soon depreciated, and 
then arose a clamor for another issue of paper.* 
Accordingly, in 1786, an emission of ;£ioo,ooo was 
authorized.^ The new bills were declared a legal 
tender in all payments, and a tax was levied for 
their redemption. It was promised, furthermore, 
that when the tax brought bills into the treasury, 
the money should not be placed in circulation 
again. Some of the new bills were used for state 
expenses, and a debt was thus incurred for expendi- 
tures on the " civil list," which should have been 
defrayed out of the taxes of the year. Then a cer- 

1 McRee, II. 46. * Idem. 

« Idem, II. 63. * Iredell, Laws, 550-553. 

' American Museum, II. i lo. 


THE LAST ISSUES (1775-1788) 

tain amount, not to exceed ^^36,000, was appro- 
priated for the purchase of tobacco on the account 
of the state.^ This was intended as a means of 
providing for the state's quota of the interest due 
for that year on the foreign debt of the United 
States. The tobacco was to be sold for the high- 
est price obtainable, and the proceeds were to be 
placed at the disposal of the Board of Treasury 
of the United States. The law provided at first 
that the commissioners appointed to purchase the 
tobacco should not pay more than 50$". per cwt.^ 
Madison writes that the agent " was authorized to 
give nearly the double of the current price ; and 
as the paper was a tender, debtors ran to him with 
their Tobacco, and the creditors paid the expence 
of the farce." ^ Maclaine states that, in March, 
1786, no one was purchasing tobacco in Wilming- 
ton except the commissioners, and that " the mer- 
chants will not take it at the public price.*' * This 
seems to confirm Madison's statement that the state 
made the purchases at excessively high prices. 
Probably on account of the disadvantageous rates 
paid by the commissioners, a law was passed late 
in 1786^ requiring that "the said Commissioners 
shall not on any Pretence give more than the cur- 
rent Cost Price of the Day." But this did not 
save the state from a loss upon the transaction. 

^ See also explanatory act passed in 1786. Iredell, Laws, 590- 


« Idem, 552. * McRee, II. 139. 

• Writings of Madison, I. 244. * Iredell, Laws, 591. 


Williamson stated^ in 1787 that the tobacco had 
been purchased "for two prices." In 1788, in the 
North Carolina convention, Hill asserted ^ that the 
state had "purchased tobacco at an extravagant 
price, and sold it at a considerable loss,*' receiving 
"about a dollar in the pound/* This would mean 
a loss of sixty per cent. At the same time and 
place Johnston said:^ "We are swindlers; we 
gave three pounds per hundred weight for tobacco, 
and sold it for three dollars per hundred weight, 
after having paid very considerable expenses 
for transporting and keeping it." He said that 
a merchant who " purchases dear and sells cheap " 
is certainly a swindler. Since these statements 
passed uncontradicted, we niay safely conclude 
that North Carolina lost more than fifty per 
cent upon this speculation in tobacco. More than 
this, the paper quickly depreciated. In August, 
1786, Madison reported a depreciation of twenty- 
five or thirty per cent.* The following year Will- 
iamson wrote that twelve or thirteen shillings of 
paper were worth only one dollar in specie,^ which 
indicates a depreciation of more than fifty per 
cent.^ In 1788, two dollars in paper were worth 
only one dollar in specie.^ Williamson states ^ that 

1 American Museum, II. no. ^ Elliot, IV. 84. 

* Idemf IV. 89. * Writings of Madison, I. 244. 

* American Museum ^ II. 113. 

^ In this same year Hamilton reported a depreciation of 2 for I. 
Hamilton, II. 37. 

T Elliot, IV. 183. 8 American Museum, II. 113. 


THE LAST ISSUES (1775-1788) 

a guardian bought up paper " at twelve or thirteen 
shillings for a dollar," and used it in paying to an 
orphan the principal of an estate of i!2CXX). 

While North Carolina had furnished the federal 
government almost no financial support, the people 
of the state generally exhibited considerable fear 
and dislike of the idea of taxation by any federal 
authority.^ It was not surprising, therefore, that 
the Federal Constitution encountered bitter opposi- 
tion in the state. Paper money was another issue 
involved in the contest. North Carolina's dele- 
gates in the federal convention had voted to 
prohibit the states from emitting bills of credit,^ 
and had favored the proposition to take this 
dangerous power away from Congress.^ The 
leaders of the federalist party in the state had 
wearied of the paper-money policy adopted after 
the close of the Revolution,* while some of the 
anti-federalists had favored the measures of infla- 
tion.^ Outside of the state the delay of North 
Carolina in ratifying the Constitution was at- 
tributed to the desire "of preserving paper money 
and tender laws.*' ® The fear was expressed "^ that 
the provision of the Constitution prohibiting the 

iMcRee, II. 178, 181, 217, 286, 329. 

« Elliot, I. 271. « Idem, I. 245. 

* See opinions of Iredell, Maclaine, Davie, and Johnston. Elliot, 
IV. 89, 156, 157, 173, 183, 184 ; McRee, II. 60, 63, 246, 247, 267. 

* See McRee, II. 246-247, 267. In the state convention one 
speaker objected specifically to the prohibition of paper money. 
EUiot, IV. 169. 

* McRee, II. 241. "^ Elliot, IV. 182-185. 



issue of bills of credit by the states would interfere 
with the paper currency already in circulation, and 
it was proposed^ to amend the plan of govern- 
ment in such a way as to make such interference 
impossible. In the votes upon ratification it 
appears that the counties adjoining Albemarle 
and Pamlico sounds were the real support of the 
federal cause; and it will be noticed that this 
region was the oldest and most populous part of 
the state, representing distinctly the commercial 
interests of North Carolina.^ Five out of the six 
towns represented in the convention of 1788 
favored ratification,^ and it was from one of these 
that a protest against paper money had come in 
1783.* On the other hand, the opposition to the 
Constitution centred in the thinly populated 
districts of the interior and of the southern parts 
of the state.^ We have already noticed that, in 
1 77 1, the delegates from this southern district had 
been most anxious to flood the province with 
paper money; and it seems certain that, in 1788, 
the desire for such a currency was greatest in the 

J Elliot, IV. 247. 

8Libby, 38. 

^ Idem^ 41. Cf. American Museum^ III. 71-74. 

*McRee, II. 63. 

* See Libby's map of the distribution of North Carolina's vote. 
With this compare the map of the Eleventh Census showing the 
density of population in 1790. Eleventh Census, Report on Popu- 
lation, I., p. XIX. This shows that the southern and western 
counties had a population of from two to six persons per square 


THE LAST ISSUES (17 75-1788) 

sparsely settled regions of the south and west. 
It is evident, therefore, that there was a close 
connection between the inflationist movements in 
1785 and the opposition to the Constitution in 1788. 
Although so large a part of the debt contracted 
during the Revolution had been wiped out by the 
depreciation of the paper,^ to the great loss or 
utter ruin of the holders of the bills, North Caro- 
lina had a large debt in 1787. This consisted of 
certificates issued to creditors, the almost worth- 
less bills of credit emitted during the war, and the 
currency created in 1783 and 1785. The conven- 
tion called to consider the constitution in 1788 
recommended 2 that the legislature should "take 
efiFectual measures for the redemption of the 
paper currency " ; and the town of Wilmington, 
at least, instructed its representative to favor such 
a policy.® A few months later it was proposed to 
adopt a scale of depreciation for the paper emitted 
in 1783 and 1785, and some members desired to 
issue j^70,ooo more ; * but no such measures were 
adopted. In 1789, the paper had begun to appre- 
ciate, and complaints of a great scarcity of money 
were renewed.^ During the following year the 
assembly was "again running riot" over the 
action of Congress in voting to assume the debts 
of the states.* Taxes had been levied in 1788 and 

1 See McRee, II. 63 ; Annals of Congress, 4th Cong., 2d Sess., 
1800. ^Idenit II. 246, 267. 

« Elliot, rV. 252. ^Idem, II. 276. 

» McRee, II. 243. • Idem^ IL 301. 



1789 for calling in the continental and state paper 
and the certificates issued to public creditors,^ so 
that a certain amount of these obligations had 
been paid in at the treasury.^ Maclaine reports 
that, in 1790, some persons proposed to subscribe 
these funds in the hands of the comptroller and 
treasurer as a part of the debt of the state.® The 
assembly did actually draw upon these securities 
in the treasury for j<C 12,000 to defray contingent 
charges for the current year.* Under the funding 
act of 1790, the United States authorized the 
assumption of ^^2,400,000 of North Carolina's 
indebtedness, and the national government actually 
assumed 1^1,793,803 ^ of this amount 

But a large part of the bills of credit issued in 
1783 and 1785 remained in circulation. In 1796, 
Walcott reported « that the "debt of the State 
consists principally of paper bills of credit, of 
which about one hundred and fifty thousand 
pounds are estimated to be in the treasury and 
in circulation." A year later the debt of North 
Carolina was reported to be ^^430,000,^ which 
represents probably the approximate amount of 
currency then outstanding. In 1804, the state 
chartered the Bank of Cape Fear and the New- 
bem Bank, and required that the capital of each 

1 Iredell, Laws, 630, 666. ^ Idem, II. 301. 

8 McRee, II. 304. * Idem, II. 304. 

» Tenth Census, VII. 327 ; U. S. Stat., I. 142. 
• State Papers, Finance, I. 434. 
7 Annals of Congress, 4th Cong., 2d Sess., 1802. 

THE LAST ISSUES (i 7 75-1 788) 

institution should be subscribed in specie. The 
managers of these banks ^ "contrived to get 
possession of nearly all the paper money which 
had been issued on the faith of the State, which 
being at the time a legal tender, enabled them to 
evade demands for specie, which they did, by 
thrusting this ragged paper at those who presented 
their notes for specie/' This makes it seem 
probable that in 1804 there was some difference 
between the value of paper and that of gold or 
silver. The bills of credit were still in circulation 
in 1 810, when the State Bank of North Carolina 
was chartered. The law establishing this institu- 
tion provided 2 that the capital stock should be 
i! 1,600,000, and that one-fourth of this amount 
should be paid " in the paper currency emitted by 
this State." After the bank should be ready to 
commence business, the notes were to be no longer 
a tender for debts due to or from the bank. 
Finally, the dividends on the ]J!2 50,000 of stock 
owned by the state were to be applied to the 
redemption of the paper subscribed to the bank's 
capital. But this law did not fully accomplish the 
purpose of retiring the paper money ,^ for the sub- 
scriptions to the stock of the bank proved smaller 
than was desired, in spite of the fact that addi- 

^ Gouge, 144. 

'Laws of North Carolina, 1171-1180. This law was entitled 
" An act to redeem the paper currency now in circulation, and to 
establish a bank," etc. Cf. Gouge, 145. 

* On this bank see Sumner, Banking, 46-47, 85, 176-177. 


tional inducements were ofiFered by a subsequent 
act of the legislature.^ In 1814, the charters of the 
Banks of Cape Fear and Newbem were extended 
upon condition that, in case the State Bank should 
be voluntarily dissolved before December 18, 18 16, 
these institutions should redeem the bills of credit 
with their own bank notes at the rate of one 
dollar for ten shillings.^ This showed, of course, a 
depreciation of twenty per cent in the value of the 
old currency, which was issued at the rate of one 
dollar for eight shillings. In 181 4, 181 6, and 
1823, the state treasurer was authorized to issue 
|i262,cxx) of treasury notes in order to pay for 
subscriptions to bank stock.^ The dividends 
received from these investments were used in 
retiring the notes, but in 1836 it was stated* that 
1^50,887 were still outstanding. 

In 1837, John C. Calhoun made the following 
statement^ concerning the history of the bills of 
credit issued in 1783 and 1785: "North Carolina, 
just after the Revolution, issued a large amount of 
paper, which was made receivable in dues to her. 
It was also made a legal tender, but which, of 
course, was not obligatory after the adoption of 
the Federal Constitution. A large amount, say 
between four and five hundred thousand dollars, 
remained in circulation softer that period, and con- 
tinued to circulate for more than twenty years at 

1 Laws of North Carolina, 1199. > Idem, 1301-1302. 

» Idemy 1 301, 1346; Sumner, Banking, 177. 
* Idem, 177. * Calhoun, III. 86. 


THE LAST ISSUES (17 75-1 788) 

par with gold and silver during the whole time, 
with no other advantage than being received in 
the revenue of the State, which was much less 
than |i 100,000 per annum. I speak on the informa- 
tion of citizens of that State, on whom I can rely." 
If Calhoun had consulted the law passed by the 
legislature of North Carolina in 18 14, he would 
have learned that ten shilUngs of bills of credit 
were worth at that time only eight shillings in 
specie. In 1787, as we have seen, the deprecia- 
tion was very much greater. 

We have now followed the history of paper 
money in North Carolina through three periods, 
of which the first begins in 1712 and the last ends 
about a century later. The first period ended with 
an act of utter bankruptcy, the paper currency 
having sunk from ;^i50 colonial in 171 5 to 
;£iooo colonial in 1748 for every ;£ioo sterling. 
The experience of the province during the second 
period, which ended in 1774, was much less dis- 
astrous. Yet the bills of credit issued in 1748 and 
subsequent years depreciated from ;^I33 to ;^200 
colonial for j^ioo sterling. That worse results 
were not reaped during these years was due solely 
to the restraining influence of the governors, who 
were bound by explicit instructions and by the act 
of 1764; for the assembly desired repeatedly to 
emit large sums of new paper. In respect of the 
repeated violations of public faith, the second 
period was hardly better than the first. Moreover, 
the province entered upon the contest for inde- 


pendence, burdened with a paper currency and 
unprovided with an adequate system of taxation. 
The third period saw the rise and fall of the 
continental paper currency and the issue of 
1^34,100,000 by the state; all of which became 
practically worthless in 1781, entailing a second 
bankruptcy. Then ;£200,ooo more paper was 
issued in 1783 and 1785, only to depreciate to 
one-half its nominal value and to involve the 
state in a losing speculation in tobacco. What 
the subsequent policy of North Carolina might 
have been if the Federal Constitution had not pro- 
hibited the issue of bills of credit by the states, 
can be only a matter of conjecture. Perhaps the 
War of 18 12 would have furnished a pretext for 
another reckless inflation of the currency. In 
any event, the state was unwilling to levy taxes 
to redeem the paper that was outstanding in 1789. 


Part III 




During Queen Anne's War, New Hampshire 
became involved in debt, and began to issue bills 
of credit in order that " the government may stand 
fair with her Majesty's good subjects, and the 
soldjers may be encouraged in the defense of the 
Province." ^ The first issue of ;^3000 was made 
in 1709,^ and the bills then emitted were declared to 
be receivable for taxes at five per cent advance;^ 
so that they practically bore interest. Taxes seem 
to have been established to redeem the bills within a 
period of five years. 

During the following year, it became necessary 
to raise additional funds,* and a second issue of 
;^25oo was authorized.^ In 171 1, the legislature 
voted* to reissue j^2000 of bills that had been 
brought into the treasury in payment of taxes, 
and emitted ;£2000 of new currency.^ At about 

* Papers of New Hampshire, III. 420. 

*/<^/w, III. 410-41 1. The house of representatives declared 
that it would prefer to borrow from Massachusetts the money needed. 

* Idem^ III. 430. 

* See Letters of governor. Idem^ III. 440, 449. 
»/i^»f, m. 460. 

« Idem, III. 474, 475, 477, 503, 505. 
» Idem^ III. 503, 505. 



the same time it was decided to discontinue the 
five per cent advance allowed on money paid into 
the treasury, since it was thought that the bills cir- 
culated readily enough without such a concession.^ 
It now became necessary to pass an act for sup- 
pressing counterfeiting.^ In 1 712, in order to pay 
various claims against the province, it was decided 
to reissue the ;£iooo that would be received from 
the payment of taxes for that year, and to make a 
new emission of £soo^ This brought the total 
issues up to ;£8ooo (^^26,660);* and, since the 
;^3CXX) of bills reissued must have represented 
practically all of the money received from the 
taxes levied to sink the currency, it is probable 
that the whole amount of the original emissions 
was in circulation. In May of this year the legis- 
lature authorized the treasurer of the province to 
receive torn or defaced bills in exchange for cur- 
rency that was in good condition.^ 

In April, 171 3, the war was ended by the 
Treaty of Utrecht, and no more paper money was 
manufactured during that year. But, in 1714, 
;£i200 was emitted "for the payment of the 
province Debts." ^ In this year it was found ^ 

1 Papers, III. 473-474- 

* Idem, III. 477. The text of this act may be found in Acts of 
N. H., 34. It made the penalty for counterfeiting the same as for 
forgery. « Papers, III. 533-534- 

^ I assume that the dollar was rated at six shillings. 

» Papers, III. 514. 

« fdemf III. 565. These bills were to be redeemed in five years. 

7 Idem, III. 563. 


COLONIAL ISSUES (i 709-1 739) 

that the taxes were being paid partly in bills 
issued by Massachusetts, Rhode Island, and Con- 
necticut ; and accordingly the legislature voted to 
lend the entire j^iSCX) of taxes collected during the 
past year to persons who would agree to repay 
the loan in New Hampshire currency.^ Thus in 
the second year of peace the province managed 
to increase its issues by ;£i200, and to prevent 
the retirement of ;^iSoo of bills that should have 
been withdrawn from circulation. 

The bills issued by each New England province 
came to circulate freely in all of the others,^ so 
that Douglass could speak of the "promiscuous 
Currency in the four Governments.**® In 171 2, 
we find that New Hampshire deposited a certain 
quantity of her bills in Boston in order that they 
might be exchanged for worn and defaced money.* 
The result was that practically a single currency, 
subject to a uniform rate of depreciation, circulated 
in New England until 1 749.^ Thus, in 1 741, a writer 

^ Papers. The money appears to have remained in the hands of 
the borrowers for a long time. In 1 715, it was reported that the 
loan had been made and good security taken. Idem^ III. 605. In 
1 7 16, ^^230 more was loaned in the same manner. Idem^ III. 643. 
In 1722, it was reported that the ;f 1500 loan and the ;^230 loan 
were represented by bonds that were in safe keeping. Idem^ IV, 
341. In 1732, the borrowers of this ^£^1730 loan were required to 
pay arrears of interest and renew their bonds. Idem^ IV. 655. 

* Bronson, 52-53; Douglass, Discourse, 309; Papers, V. 565. 

* Douglass, Discourse, 311. 

* Felt, 64. 

* This is evident from a comparison of tables of depreciation in 
the four colonies. See Felt, 83, 135; Diary of Hutchinson, I. 53; 

P 209 


in Boston stated that " public bills of four Prov- 
inces " were circulating in Massachusetts at 2gs. 
for an ounce of silver.^ In 1739, the secretary of 
the province of New Hampshire wrote to the 
home authorities as follows:* "The rate of 
Silver and Exchange between this Currency and 
Sterling has always been the same as at Boston, 
which is the Grand Mart of New England, and in 
that respect governs the whole country." The 
New England money began to depreciate in 171 3 
or 1 714; and, by the latter year, 9^. in New 
Hampshire paper was required to purchase one 
ounce of silver, whereas Ss. would have sufficed 
at the time the first bills were issued.* With a 
view perhaps to preventing further depreciation, 
the legislature now decided that the paper should 
once more be received at the treasury at five per 
cent advance.* 

In 1715, it was found that ;^iSOO of province 
bills had been drawn into the treasury; and the 
legislature voted to reissue ;^SOo of this money, 
while it was decided to have the remainder burnt.^ 
This was the first time that the law had been 
obeyed by destro)ring the paper received from the 
taxes levied to sink the bills. By this means the 

Douglass, Summary, I. 494; Wright, LXV.; Belknap, III. 225; 
Coll. N. H. Hist. Soc., V. 258; Bronson, 52; Potter and Rider, 55; 
Wecdcn, 473-474. 484. 

1 Felt, 107. « Papers, V. 46. 

* Cf. Douglass, Discourse, 304; Belknap, III. 225. 

* Papers, III. 564. 

» Idem, III. 586, 589, 591, 592, 605. 

COLONIAL ISSUES (i 709-1 739) 

issues outstanding were reduced to about £8200,^ 
and the price of silver remained at gs. for the 
year 1715. During 17 16, the legislature reissued 
;^I500 of bills 2 instead of burning them, so that 
the currency remained stationary. At the same 
time, taxes to the amount of ;£iooo were sus- 
pended.* The price of silver rose to los. per 
ounce for 1716, the increased depreciation being 
due perhaps to larger issues of paper by other 
provinces. Although the colony now had a paper 
circulation of about $27,000,* and a marked de- 
preciation of twenty-five per cent had set in, the 
legislature had complained of " a very great 
scarcity of Money," and had resorted to a repeal 
of part of the taxes levied to sink the bills of 
credit. This action was prophetic of the events 
of the ensuing year. 

Early in 1717, it was proposed to make a new 
and much larger emission,^ and by May it was 
voted to issue ;^ 15,000 on loan for eleven years 
at ten per cent interest.^ The money was to be 

^ The total issues had been ;f9200 after the emission of 1714. 

* Papers, III. 643, 644, 646, 647. 

• Idem, III. 647. 

^ The circulation most have remained at about ;f 8200, or 127,330. 
The population of New Hampshire was estimated at only 10,000 in 
1730. Coll. of N. H. Hist. Soc, I. 229. The money in circulation 
in 1 7 16 must have amounted to about three dollars per capita, a 
large sum for a province with so few industries and so little com- 
merce as New Hampshire had. In 1 730, the imports into the prov- 
ince were estimated at only ;f 5000 sterling, /dim, I. 228. 

* Papers, III. 671, 675, 687. 

• Idem, III. 688-689. Cf. Belknap, II. 20-21 ; Hildreth, II. 311. 



lent upon mortgages on land double the value of 
each loan, and the various towns were to receive 
shares proportioned to their quotas of the province 
taxes. The annual payments of ten per cent of 
the loan were to be burned in the presence of the 
assembly each year, and bills issued by other 
provinces were to be accepted in such payments 
only at five per cent discount It is evident that 
the New Hampshire inflationists were unwilling to 
be outdone by their brethren in Massachusetts 
and Rhode Island, where public loan banks had 
been created in 1714 and 1715.^ None of the 
bills of former emissions were burned this year,^ 
so that the currency of the province must have 
been increased to about ;£2 3,000. As a result, the 
price of an ounce of silver rose to 11 j. in 1 718, and 
i2s. in the following year.* 

For the next few years the inflationists seem to 
have been content with what they had accom- 
plished. In 1 71 8, the assembly voted to bum 
;^900 of old bills,* but the records do not state 
distinctly that this event took place. In 1720, 
;^964 was actually bumt.^ Thus, at the most, the 
currency was decreased by only £1^64 between 
1 71 8 and the end of 1720. Meanwhile counter- 

1 Felt, 67; Potter and Rider, 11. 

*The records show no further burning of bills until 1718. In 
January, the lower house of the legislature passed an act intended 
to reissue all the bills of credit in the treasury. Papers, III. 667. 

» Belknap, III. 225. 

* Papers, III. 736,737. 

^/dem, III. 786. 


COLONIAL ISSUES (i 709-1 739) 

feiters had been at work in the province,^ so that 
the governor recommended that some of the bills 
should be exchanged for new currency.^ In 1721, 
the governor received instructions from England 
to consent to no more laws for issuing bills of 
credit unless they contained a clause providing 
that they should not go into operation until ap- 
proved by the home government.^ By this time 
the depreciation had increased so greatly that an 
ounce of silver was worth i^s, in paper;* yet it 
appears that jQiSOO of money that had been 
drawn into the treasury was " misapplied," so that 
the governor had to urge the assembly to "con- 
sider of ways and means to bring it into the treas- 
ury again." ^ 

During 1721, bills to the amount of ;£ 11 88 were 
burned .* but the currency did not improve. In 
spite of this fact, the legislature attempted to emit 
;^20,ooo and then ;£ 15,000 of new paper, and 
desired to reissue money that had been paid into 
the treasury.^ Thus the appetite for a cheap cur- 
rency had not been satisfied, although $67,000 of 
paper was in circulation.® 

1 Papers, III. 797. ^Idtm, III. 830. 

^ It/em, III. 813-814. Cf. Bancroft, II. 263 ; Green, 163. 

* Belknap, III. 225. * Papers, III. 830. 

«/</^w, III. 810, 819, 829. 

Wiigm, III. 802, 807, 815, 835, 838. 

^ Subtracting the sums already stated to have been burned from 
the total emissions, it appears that ;f 20,148 was in circulation or in 
the treasury. This would amount to more than six dollars per 



The colony now became involved in an Indian 
war which lasted for three years.^ This furnished 
a pretext for renewed issues of paper ; and another 
was found in a proposition " for Striking bills of 
Credit in this province for the encouragement of 
raising naval Stores/' ^ for which the royal assent 
was desired. The result was that in May, 1722, 
the legislature voted to issue ;£28oo ; ^ and in the 
following October decided to emit ;^2000 more.* 
These were used for province expenses, and were 
to be redeemed by taxes payable in bills of credit 
or naval stores. No paper seems to have been 
burned this year; and, by its close, silver was 
selling for 14^. 6rf. per ounce. Besides making 
these two new issues, the legislature voted ^ to 
emit j£S3^4 of bills of credit to be exchanged for 
the worn and defaced paper issued prior to 1716.* 
These new bills were to be redeemed in five equal 
instalments by taxes that should begin in 1724 
and continue to 1728.^ 

1 See Belknap, II. 43-83 ; Papers, IV. 148. 

2 Papers, IV. 40, 317. •Idtm, IV. 35, 36, 38, 39, 315. 
*/fl5fw, IV. 74, 76. »/dV»i, IV. 35, 36, 315, 339, 340. 
•The issues prior to 1716 amounted to ;£'9200. Of these I find 

that no more than £2000 were burned prior to 1722. Idemy III. 
592, 605, 737. The other bills that were burned were a part of the 
£i$iO0O emitted on loan in 1715. This would make it seem that 
;f 7200 of the early bills must be in circulation, whereas the law of 
1722 proposed to exchange only £<fZ^' The legislature may 
have assumed that all of the ;f4052 of bills burned prior to 1722 
were of the emissions prior to 1 7 16. On this assumption it would 
have been calculated that £$1^^ were in circulation. 

'^ The old bills were replaced only gradually by the £sz'^A emis- 

COLONIAL ISSUES (i 709-1 739) 

The province had, at the beginning of 1723, a 
currency amounting to about ;^25,ooo'^ This was 
equivalent to at least eight dollars per capita,^ 
and the price of silver soon advanced to i6s, per 
ounce. During 1723, the records show that ;£32i 
of the bills were retired,* while no more issues were 
made. But, in 1724, the governor had to ask for 
additional funds for conducting the campaign 
against the Indians,* and a new issue of ;£2C)00 
was authorized.^ These bills were to remain in 
circulation for a period of ten years, since the 
taxes levied to redeem them were not to be col- 
lected until 1733 and 1734. During 1724, £626 
of the currency was burned,^ so that the net 

sion. I find that ;f 2281 of old bUls were exchanged between 1723 
and 1726. Papers, IV. 119, 122, 137, 162, 163, 181, 195, 196, 
202, 211, 228. By 1737, the total number of bills exchanged was 
;f4998. See Papers, IV. 246, 247, 299, 517, 598, 618, 633, 652, 
690, 704, 710, 718, 732. In 1742, £S$ more was exchanged. 
Papers, V. 182. This raised the amount exchanged to ;f 5084. 

^This is the total of the ;£'20,i48 issued and in circulation prior 
to 1722, and the ;f 4800 emitted in that year. 

* The province could not have had a population much in excess 
of 10,000 before 1730. See Coll. of N. H. Hist. Soc^ I. 229. 

• Papers, IV. 348. Besides this, ;f 789 of the bills issued prior 
to 1 71 6 were burned after being exchanged for bills of the £S3S4. 
emission. Idem^lV, 119, 122. This, however, did not effect any 
change in the amount of money in circulation. In subsequent 
statements no account will be taken of the bills exchanged for 
those of the ;f 5384 emission. ^Idem, IV. 156. 

^Idemy IV. 157, 158, 167, 395, 398; V. 29. The house of' 
representatives desired to emit ;f3000, but the council refused. 
Idimy IV. 156, 157. This is perhaps an indication of a desire for 
a conservative policy upon the part of the counciL 

•/</if»»,IV. 381. 

increase of the paper money for the year was only 

In May, 1725, Governor Wentworth informed 
the assembly * that the clergy of the province had 
been sorely distressed by the depreciation of the 
paper currency, since salaries of ;£ioo established 
a dozen years before had been reduced to about 
one-half of their original worth.^ The assembly, 
in the same month, abolished the five per cent 
advance that had been allowed for province bills 
received in payment of taxes.* Shortly after this, 
bills issued by the other New England colonies 
were made receivable for the taxes of the current 
year.* This last action is explained probably by 
the desire of the assembly to make the retirement 
of the New Hampshire bills as difficult as possible, 
for any bills of the other provinces that might 
come into the treasury were sure to be reissued. 
In December, an issue of £2000 of paper was 
authorized ^ in order to defray the expenses of the 
war. This emission, like the previous one, was to 
be redeemed by taxes due only after ten years. 
The paper burned during this year amounted to 
£1377,^ so that the net increase of the currency 
was £607. 

1 Papers, IV. 169. 

^Silver was at Zs, per ounce in 1 7 10, and at 151. or i6j. in 1725. 
Selknap, III. 225. 

•Papers, IV. 175, 178, 401. 

^Idem, IV. 407. See also law of 1729. Idem^ 522, 529. 

^Identy IV. 194, 205, 411, 417, V. 30. 

^ Idem, IV, 181,405. 


COLONIAL ISSUES (i 709-1 739) 

At the opening of 1726, the province must have 
had about £^26fi2\ of paper in circulation.^ In 
January, £,^QO was issued in order to replace worn 
or defaced bills of any issue since 1715.^ Then 
in December two new emissions, aggregating 
^2cxx), were authorized.* One-half of these was 
to be redeemed by taxes in 1737, and the other 
half in 1738. In this same month the legislature 
had to appropriate ;£ 1 50 of currency in order to 
purchase a bill of exchange for £,^0 sterling.* 
During the course of the year bills amounting to 
;^940 were burned,^ so that the legislation of 1726 
resulted in a net addition of ;£io6o to the currency 
of the province.* 

In 1727, a further emission of £^2000 was author- 
ized, and the bills were to be redeemed in 1739 
and 1740.^ Thus the period of redemption, which 
at first had been five years, had now been length- 
ened to thirteen. During this year ;£i099 of the 
former issues was retired,^ so that the real increase 

^This equals the ;f 24,948 circulating at the end of 1722, plus 
the ;f4000 emitted in 1724 and 1725, and minus the ;f2324 burned 
in 1723, 1724, and 1725. 

* Papers, IV. 201, 205, 416, 417. 
^Jdem, IV. 232, 239, 438, 443, v. 30. 

^ Idem^ IV. 233-234. This corresponds very closely to the 
figures of Belknap. The latter gives i6j. as the price of silver in 
1726. Belknap, III. 225. The sterling price of silver was 5^. zd, 

* Papers, IV. 237, 422, 442. 

• In May of this year the house desired to issue £2000 for pub- 
lic buildings, but the council refused. Idemt IV. 430* 

'^ Idem, IV. 250, 251, V. 30. 

• Idem, IV. 246, 445. 



of the currency was j£goi. In the spring of 1728, 
the lower house of the legislature proposed to issue 
;£30,ooo upon the same terms as the loan of 171 7, 
but the council objected on the ground that this 
was too large a sum.^ A similar proposal was 
made a month later, and met with the same fate.* 
Upon the first of June, two projected issues were 
under discussion, but neither one seems to have 
been authorized.* During this entire session the 
two houses of the legislature had been engaged 
in a series of disputes over various matters,* and 
it is not strange, therefore, that the council felt 
inclined to object to a proposal to add £so,ocx) 
to a currency that was already depreciated. The 
legislature was dissolved in June, and did not meet 
again until April 22, 1729.^ Diuing the entire 
year no bills seem to have been destroyed, and the 
price of silver had now advanced to 17^. per 

When the legislature met in 1729, several at- 
tempts were made to reissue bills that had been 
drawn into the treasury in payment of taxes.' In 
the end, £1776 of the currency was reemitted,® 

1 Papers, IV. 289, 490. 

* /iigm, IV. 298. Meanwhile, a proposition to issue ;^3000 had 
failed to receive the approval of the council. Idem, IV. 491. 

« Idem, IV. 502. 

^ On this dispute see Belknap, II. 90-93. 

6 Papers, IV. 308. • Belknap, III. 225. 

'Papers, IV. 529, 553. 

8 This was in two issues of ;^ 1076 and £7^^» Idem, IV. 516^ 
5i7»530»546, 550»557»V. 30. 


COLONIAL ISSUES (i 709-1 739) 

after a discussion in which the instructions of the 
governor played a part.^ The salary of the chief 
magistrate was now fixed at ;£6cxd in the paper 
money of the province, a sum which was declared 
to be worth ;£2CX) sterling.^ By this time the 
;£i 5,000 issued on loan in 171 7 was due, but only 
£^797 had been actually paid in and destroyed.* 
The legislature was unwilling to retire this cur- 
rency, but finally provided that it should be with- 
drawn in three instalments in 1729, 1730, and 
173 1.* During the entire year, ;£3io8 of old bills 
were burned ; ^ but the outstanding currency still 
amounted to about ;£2 5,477, while the price of 
silver advanced to igs, 6d, per ounce.^ 

In 1730, Governor Belcher informed the assembly 
that he had " a liberty to emit from time to time 
what Bills of Credit may be necessary to defray 
the expense'* of the province.^ Accordingly no 
time was lost in preparing a bill for issuing ;£i300,® 
which received Belcher's assent after the assembly 
had made alterations desired by him in the bill 
granting his salary.® Encouraged by its success 
in this matter, the legislature, later in the year, 
passed a bill for issuing £6000 for repairing forts 

1 Papers, IV. 517. 

^Idem^ IV. 513. For Belcher's salary in 1730 see Idem^ IV. 
570, 760, 761. 

•See Idem^ III. 786, 810, 819, 829, IV. 181, 237, 246, 349, 381, 

^Jdem, rV. 516, 537, 544, 624. 'Papers, IV. 566. 

» Idem, IV. 497, 517, 526. ^Idem, IV. 571, 572, 761. 

« Belknap, III. 225. ^ Idem, IV. 571-572. 



and building a state house.^ This time, however, 
the governor objected,^ and " produced his Instruc- 
tions prohibiting his assent to any bill for the 
Emission of any more paper currency, except for 
the support of the government." Besides this 
measure, the assembly sought also to postpone to 
a later period the redemption of the outstanding 
bills; but here again Belcher's veto was encoun- 
tered.* No paper money was burned during this 
year, so that the currency of the province must 
have increased to about £26^77. 

In 1 73 1, the legislature brought forward repeated 
projects for issuing more paper, one of these tak- 
ing the form of a £40^000 loan,* but these efforts 
proved fruitless. No bills were burned in this 
year, however, so that the currency remained 
unchanged. In 1732, Governor Belcher, whose 
instructions required him to have the outstanding 
currency retired punctually according to the law,* 
called the attention of the legislature to the ;£i 5,000 
loan emitted in 171 7.® He said that, although all 
of the loans ought to have been paid by 1731, 
not half of the issue had actually been collected. 
When the legislature desired to emit £1000 of 
bills to be redeemed by a tax in 1744, he informed 
it that his instructions required him to have all the 
money retired by 1742.^ During the year, the 

1 Papers, IV. 583. » Idemy IV. 772. 

^Idem, IV. 771-772. • Idem, IV. 624. 

• Idem, IV. 771. ' Idem, IV. 621, 622, 786. 

* Idem, IV. 593, 607, 608, 777. 


COLONIAL ISSUES (1709-1739) 

currency was diminished by burning ;£i3ii of old 
bills,^ so that it stood at about £2^,466, 

In 1733, the house of representatives twice 
attempted to emit ;£20,ooo upon loan for a period 
of sixteen years, but the council objected to the 
project, stating finally that it would be "diamet- 
rically opposite" to the governor's instructions.^ 
The representatives then desired to petition the 
King for his assent to this project,^ and a deadlock 
ensued which was ended by the governor, who dis- 
solved the assembly.* In January, 1734, a new 
legislature was convened, and Belcher urged it to 
place the defences and public buildings of the 
province in proper condition, and to provide for 
the public debts.^ Within a few days the lower 
house proposed to issue ^^3000 of paper that 
should not be retired until after 1742, and the 
council passed an act to emit ;£3000 which should 
be cancelled in 1740, 1741, and 1742.* This ulti- 
mately led to another deadlock,^ which called from 
Governor Belcher a sharp message stating that he 
would not under any conditions extend the time of 
the currency beyond 1742.® The representatives 
then declared their intention of appealing to the 
Board of Trade, and defied the governor.® They 

1 Papers, IV. 598, 622. 
« /dVw, IV. 634, 635, 636, 637, 640, 791. 
» Idem, IV. 641-642. * /demy IV. 644-645. 

* /dfmf IV. 647-648. On this dispute see Belknap, II. 109- 

« Papers, IV. 655, 799. • /demy IV. 662. 

f Idem, IV. 657-661. » /depi, IV. 663-664. 



next discussed plans for reissuing interest money 
due on. the ;£ 15,000 loan, until Belcher finally dis- 
solved the assembly a second time.^ Belcher then 
issued a proclamation ordering the commissioners 
in charge of the ;£ 15,000 loan to enforce strictly 
the payment of the amounts still outstanding.^ 

In the fall of 1734, a new assembly was convened, 
and urged by the governor to provide the funds 
needed for meeting public debts and supporting 
the government.* But the members showed no 
disposition to comply with his request, and were 
soon sent back to their homes. Between January i , 
1733, and December 31, 1734, the bills of credit 
burned amounted to ;£2035,* so that the currency 
of the province now stood at the sum of ;£23,43i. 
Yet the large issues made by the other colonies in 
New England and the unwillingness of the New 
Hampshire legislature to fulfil its own promises 
had discredited the paper, so that silver was now 
selling ^ at 2js. per ounce. Under such conditions 
the house of representatives had passed an act 
making the paper issued by the province a tender 
even in special contracts^ and had the assurance 
to send over for the consideration of the English 
authorities a scheme for emitting ;£6o,ooo of new 
bills of credit.^ 

In April, 1735, Governor Belcher called the 

1 Papers, IV. 666-667. * Belknap, lU. 225. 

a Idem, IV. 668. « Papers, IV. 659. 

» Idem, IV. 671-680. 7 Idem, IV. 834-835. 

* Idem, IV. 633, 652. 


COLONIAL ISSUES (1709-1739) 

assembly together again. He informed them that 
no taxes had been laid to supply the treasury for 
four years, and that the needs of the province were 
extremely urgent.^ The house of representatives 
prepared a supply bill, which provided for the 
emission of ;£4000 of bills of credit ^ that were to 
be redeemed in 1742 by taxes payable in hemp, 
flax, and bills of credit issued by the other New 
England provinces as well as those emitted by 
New Hampshire. The council objected to this 
measure, pointing out, among other things, that a 
tax payable in this manner would not call enough 
province bills into the treasury to make it possible 
to retire the paper by 1742.^ The representatives 
insisted upon their original measure, and the gov- 
ernor then dissolved* the assembly. During the 
session Governor Belcher had called the attention 
of the legislature to the fact that certain citizens 
of New Hampshire had presumed " to strike and 
Issue paper notes or Bills to pass in lieu of money." 
He said that, since the province was restrained by 
express instructions from doing such a thing, " pri- 
vate persons ought not to presume upon it." ^ The 
house of representatives replied ^ that it was " not 
sensible wherein such an attempt is unwarrantable 
unless some notorious Fraude or Cheat might be 
designed and discovered therein," since the in- 
structions from the English authorities did not 

1 Papers, IV. 681, 685. * Idem, IV. 696-698. 

« Idem, IV. 694. » Idem, IV. 685. 

• Idem, IV. 695. « Idem, IV. 688. 



extend "to negotiable Notes amongst Merchants 
and Traders." Belcher proceeded to issue a 
proclamation warning people against receiving 
the notes; and desired to have the legislature 
pass an act outlawing these private issues/ as 
Massachusetts had been induced to do.^ He as- 
serted that complaints had been received^ that 
"some of the Principle founders or undertakers 
in the scheme have Refused to give credit to 
those their own notes." This seemed to close the 
incident* During 1735, bills were burned to the 
amount of ;£i023,^ so that the currency amounted 
to about ;£22,4o8. 

In 1736, a new assembly was called together, and 
the old quarrel was resumed ; but the grounds of 
dispute were slightly changed. The house of rep- 
resentatives finally drew up an address to the gov- 
ernor, ^ which the council pronounced " so full of 
first Principles of Nature and void of those of 
Grace" as to justify a refusal to join with the 
lower house in any further acts of legislation.^ 
Governor Belcher called the answer of the repre- 
sentatives indecent, and once more dissolved the 

1 Papers, IV. 688, 697. 

^In 1735, Massachusetts passed an act forbidding any person 
to receive the bills issued by these New Hampshire merchants. 
Acts of Mass., II. 743-744. 

« Papers, IV. 697. 

*0n this private issue in New Hampshire see Belknap, II. no; 
Felt, 91-92. 

« Papers, IV. 690. 

• Idem, IV. 707-708. ' Idem, IV. 71 1-712. 


COLONIAL ISSUES (i 709-1 739) 

assembly.^ During 1736, paper to the amount 
of ;£iooo was retired,^ and the currency was 
reduced to ;£2 1,408. Toward the close of the 
year the price of silver fell from 27^. 6d, to 26s. 
6d,,^ so that the resolute course of Governor 
Belcher * was resulting in a slight decrease of the 

Early in 1737, a new assembly convened, and 
the governor stated that it was now six years since 
"any supply of money to the Treasury" had been 
provided.^ The representatives then proceeded 
to discuss the advisability of issuing ;£3000 to 
replace worn and defaced bills.® Finally the gov- 
ernor consented to the issue of £6soo of new bills, 
in order to defray the accumulated debts of the 
last five or six years.^ These debts included £970 
of arrears on the salary of the governor, six years 
arrears of salary due to the treasurer, six and one- 
half years salary due to the clerk, and arrears due 
to other persons for periods of similar length. 
These new bills ® were to be redeemed by taxes ^ of 
which ;^4000 were payable in 1741, and ;£2500^^ 

1 Papers, IV. 712-713. « It/em, IV. 704. 

• Belknap, III. 225. 

*The council bore tbe brunt of tbe contest with the represen- 
tatives, but it was probably reflecting the governor's wishes. This 
often happened in colonial politics. See Greene, 87. 

» Papers, IV. 716. ^ It/em, IV. 717, 822, 824, 

f/dem, IV. 722-724, 732, 734. 

• A copy of one of these bills may be found in Winsor, V. 174. 

• Papers, IV. 724. 

^In IdfM, V. 30, this issue appears as two issues, one of 
£^poo and the other of ;f 2500. The date is erroneously stated 1 736. 
Q 225 


in 1742. Thus Belcher nominally adhered to the 
letter of his instructions ; but the taxes seem to 
have been made payable in hemp, flax, and bar 
iron, as well as in paper, so that they would not 
suffice to call in all of the bills emitted. 

The assembly now succeeded in securing the 
passage of a bill for the issue of ;^3000 in order 
to exchange old and worn bills.^ Not content 
with this, efforts were made, upon various pretexts, 
to issue ;£500, ;^iooo, and then £iSoo more 
paper; but all of these seem to have failed.* 
During 1737, bills to the amount of £g6s^ had 
been burned ; so that the currency of the province 
had received a net increase of £SSS7^ and now 
equalled £26,g4S. In the following year, silver 
rose to 28^. per ounce.^ In reviewmg this long 
contest, Belknap justly concluded® that the real 
reason why the representatives refused for so long 
to supply the funds needed for the debts of the 
province was "that they wanted emissions of paper 
money, to be drawn in, at distant periods," which 
was contrary to the instructions of the governor as 
well as to his well-known principles. 

In 1738, the legislature was not convened until 
November. For once it seems that no propositions 

1 Papers, IV. 732, 734. In 1738, it was reported that the £31000 
had been exchanged and burned. Idemf V. 7. 

a/fl5f/w. IV. 733, 734, 748, 750, 753, 829, 830, 831, 832. 

«/fl5fw,IV. 718. 

* This is ;f 6500 minus ;f 963. The ;f 3000 issued for exchanging 
old bills would have made no addition to the currency. 

« Belknap, III. 225. « Idem, II. 109. 


COLONIAL ISSUES (i 709-1 739) 

were made for the issue of more bills of credit. ^ 
The governor called the attention of the assembly 
to the fact that the officials of Boston had arrested 
counterfeiters who had a plate for manufacturing 
bills like those emitted by New Hampshire in 
1737.2 Other indications of the activity of coun- 
terfeiters were not wanting,^ and a law was passed* 
making the penalty for this offence "the pains 
of death without benefit of clergy." The gov- 
ernor and assembly received at this time a petition 
from Rev. Hugh Adams, praying for relief. ^ He 
stated that his nominal salary of ;^I04 was now 
worth no more than £^6, on account of "the 
altered prices of all necessaries for livelihood"; 
and asked that his stipend "be made good in full 
value as really as in name," and that his parish be 
required to make the payments punctually. Dur- 
ing 1738, the records show that ;£4334 of cur- 
rency was burned,^ so that the outstanding paper 
now amounted to about ;^22,6ii. 

During 1739, no additions were made to the 
currency, and no bills were burned. In June of 

1 See Papers, V. 1-9. 

« Idem, V. 2. « Idem, V. 55-56. 

^Identt 2, 4, 5, 8, 9. Cf. also Idem, V. 212. This law may be 
found in Acts and Laws of New Hampshire, 1 71-172. 

*This petition is a most curious one. See Belknap, III. 350- 


8 Papers, V. 7. At the same time ;f 3000 of old bills, exchanged 
for the new issue authorized in 1737, were burned before the 
assembly. This did not affect the amount of money in circulation, 
and is neglected here. . 



this year, the House of Commons requested the 
Privy Council to demand from each of the colonies 
a statement of the amounts of bills of credit issued 
and redeemed since 1700.^ In accordance with 
this resolution, the secretary of New Hampshire 
prepared a statement concerning the bills of credit 
emitted by that province.* He said that some of 
the records had been lost through the destruction 
of his house by fire, and that the books of the 
office in former times had not been kept " with a 
due exactness." He stated that, as nearly as he 
could ascertain, ;^56,384 of bills of credit had been 
emitted by the province, of which ;^ 16,730^ were 
issued upon loan. He estimated that all of these 
bills had been retired except £io,S76 of the bills 
issued for public expenses and "about" ;^2000 
of those emitted upon loan; and stated that the 
paper in circulation would all be retired by 1742. 
This report will be found to differ very materi- 
ally from the statements made in the preceding 
pages, but the points of difference admit of a 
partial explanation. According to the data given 
by the writer, the emissions of new bills had 
amounted to ;£44,8oo. The report of 1739 places 
the total at ;£56,384; but this figure includes at 
least some of the bills reissued,* which are excluded 

^ 23 Journals of House of Commons, 379. * Papers, V. 45-46. 

* In this sum he included the jf 15,000 issued in 17 17, and the 
£1730 loaned out in 17 14 and 1 7 16. 

*Thus the report of 1739 expressly includes the £173/0 loan, 
which was made by reissuing bills paid into the treasury. We have 
a statement of the province accounts for the years between 1722 and 

COLONIAL ISSUES (i 709-1 739) 

from the writer's statement.^ The total amount of 
currency reissued from 1709 to 1739 was £17,390.'^ 
Some of these bills must have been included, 
besides the ;£i730 expressly mentioned, in the 
total of j£s^f3^4 stated by the secretary. In the 
second place, it will be remembered that the writer 
placed the currency in circulation in 1739 at 
£22,600;^ while the report of 1739 states that 
the outstanding bills amounted to about ;^ 12, 5 76. 
It is impossible to account for this difference. The 
writer feels certain that his account of the bills 
emitted and bills cancelled * is complete, and that 

1740, in wbich ;fio76 and ;f700 reissued in 1729 are included. 
Papers, V. 30. The report of 1739 undoubtedly includes other 
reissues besides the jf 1730 expressly mentioned. 

^ This method of procedure is simplest and most satisfactory. 
By subtracting the bills destroyed from the new issues, from which 
reissues are rigidly excluded, one can readily ascertain the amount 
of currency outstanding. 

2 This includes ;f7276 issued in 1711, 1712, 1715, 1716, 1725, 
and 1729 in order to pay province expenses, as explained in previ- 
ous paragraphs. It includes ;£'i730 issued on loan in 1714 and 
1716; jCSSH issued in 1722 to exchange old bills; and ;^3000 
issued for the same purpose in 1737. 

* This is the difference between the ;f 44,800 of new emissions 
and the ;£'22,i89 of such bills burned. The records show that 
£499S of old bills was burned before 1729 in exchange for the 
jf 5384 issued in 1 722, and that ;£'3000 was burned in 1 738 in ex- 
change for the ;f3000 issued in 1737. But these transactions did 
not alter the amount of currency in circulation, and therefore the 
;^7998 of paper thus burned is not included in the amount subtracted 
from the ;^44,8oo of new bills issued. 

* Thus the list of bills burned, which the writer secured from the 
records, is more complete than one found in a report of the treas- 
urer in 1740. See Papers, V. 23-33. 



the report of 1739 is based upon data that were 
not wholly accurate, as the secretary of the prov- 
ince admitted.^ 

In 1739, William Douglass wrote' that the 
" Publick Bills " of New Hampshire " are so much 
counterfeited they scarce obtain a Currency." For 
this reason, and on account of the instructions of 
the governor, he said that the " outstanding Bills 
of publick Credit, some on Funds of Taxes, some 
on Loan, do not exceed ;^ 12,000, gradually to be 
cancelled by December 1742/' It is possible that 
Douglass secured his information from the same 
person who prepared the report of 1739 for the 
English authorities. He tells us finally that the 
ordinary expenses of government for the province 
of New Hampshire were £iSoo New England 
currency. This gives us the basis for an interest- 
ing comparison. The £,22,600 of currency in cir- 
culation amounted to fifteen times the annual 
public expenditures, so that the practice of receiv- 
ing the bills in payment of taxes could do but little 
to maintain the credit of the paper money. 

This closes what we may call the first chapter 
of New Hampshire's experience with a paper cur- 
rency. The bills of credit had depreciated so that 
the price of silver had risen from Zs, to 29$". 6d, per 
ounce ;^ but the amount in circulation had been 

1 Moreover, since the interference of tbe English authorities was 
feared, the author of the report of 1739 had every inducement to 
place the outstanding bills at the smallest possible figure. 

^ Douglass, Discourse, 302-303. * Belknap, III. 225. 


COLONIAL ISSUES (i 709-1 739) 

diminished from ;£26, 777 in 1730 to ;£22,6ii in 
1739, and the situation would improve if Belcher's 
firm policy should be continued. Yet it must be 
remembered that the results would have been much 
worse than they actually were in 1739, if the legis- 
lature had been able to consult its own wishes in 
issuing paper. The policy of the house of repre- 
sentatives had been manifested with sufficient 
clearness, and the evident desire of this branch 
of the legislature was to provide for all province 
expenses by the emission of bills of credit that 
were supposed to be redeemed by taxes after long 
periods of ten or twelve years. Such a policy 
would surely lead to bankruptcy unless restrained 
by the governor and council, especially since, after 
the bills had once been emitted, the assembly was 
extremely disinclined to enforce the withdrawal of 
the paper at the end of the periods contemplated 
by the law. 



COLONIAL ISSUES (i 740-1 774) 

In 1740, news reached the provuice that Eng- 
land had declared war against Spain. Governor 
Belcher called the assembly together, and urged 
that Fort William and Mary should be strength- 
ened.^ The house of representatives replied that 
this could not be done ^ unless bills of credit could 
be issued and made to run beyond the year 
1742. In a few days the governor dissolved the 
assembly, after it had become evident that he 
could not secure the passage of such measures as 
he desired.^ It was reported at this time that a 
considerable part of the ;^ 15,000 loan of 171 7 was 
still outstanding.* In August, another session was 
called, in order to provide for the equipment of 
soldiers to take part in an expedition against the 
West Indies. After some recrimination it was 
voted to issue ;£2000 for this purpose, and the 
bills were to be redeemed at the end of 1 742 by 
taxes payable in paper money, flax, hemp, and bar 
iron.^ During 1740, bills of credit were burned to 

1 Papers, V. 1 1. • Idem, V. 28, 67. 

2 Idem, v. 18-19. * Idem, V. 28. 

* Idem, V. 52, 70, 71. Winsor gives a copy of one of these bills. 
Winsor, v. 175. In Papers, V. 30, the bills issued in 1740 are 


COLONIAL ISSUES (i 740-1 774) 

the amount of £1197^ so that the currency of 
New Hampshire now stood at ;^23,4I4.2 

The printed records for 1741 are exceedingly 
meagre,^ but no mention is made of new emissions 
of paper. Governor Belcher at this time sub- 
mitted a message* complaining that he had lost 
;^3240 since 1730 through depreciation of the 
bills in which his salary was paid. The representa- 
tives replied ^ that the law fixing the salary made 
no provision for changes in the value of the bills, 
and that the governor would have to be content 
with what he was then receiving. 

Late in 1741, Governor Belcher had been suc- 
ceeded by Benning Wentworth, who convened the 
legislature in January, 1742.^ The new governor 
congratulated ^ the assembly because " the Publick 
faith has been so Religiously kept in regard to 
past Emissions of paper money," and because 
" all former Emissions will be complyed with hi 
the yeare 1742." He also asked to have his salary 
fixed in such a manner that " it may not be liable 

placed at £2*joo. This sum may include the £^QO mentioned in 
Ideniy V. 72, 77. But, as the records do not show that this passed 
the council, I shall omit it from the list of issues. 
1 Papers, V. 17, 18, 23. 

* This allows for the £2000 emitted and the ;£ii97 cancelled in 
1740. If the additional jf 700, mentioned in a previous note, was 
actually emitted, then the currency would amount to jf 24,1 14. 

• See Papers, V. 73-86. 

* Idem, V. 84-85. 6 Idem, V. 85. 

• On Wentworth's relations with the legislature at this time, see 
Belknap, II. 183-186. "^ Papers, V. 136. 



to vary or subject to depreciate by the uncertain 
value of paper Currency/' which is an indication 
that his faith in the good intentions of the assem- 
bly was not over strong. The representatives pro- 
ceeded to request that Wentworth should inform 
them concerning the nature of his instructions on 
the subject of issuing bills of credit,^ and soon had 
under way a bill for emitting ;£6ooo.* The gov- 
ernor insisted that he could not assent to any such 
measure unless ample provision was made for his 
support ; ^ and a bargain was finally arranged 
upon this basis, Wentworth receiving a present of 
;£i25, and an annual grant of £2SO out of the 
interest of the money that was soon issued upon 
loan.* As a result, we find him assuring the legis- 
lature of his "hearty concurrence" in any meas- 
ure that would "expedite" the emission of the loan 

The net result of the bargain concluded in 1742 
was the issue of £4720 of paper money in order to 
pay public expenses,® and the emission of ;£25,ooo 
upon loan.^ Both of these issues were to be of a 
new tenor, and were declared equal to proclama- 
tion money, i.e. silver at a rating of 6^. 8d. per 
ounce. The bills of former emissions, now to be 
known as old tenor, were to pass in all payments 

1 Papers, V. 139, 141, 146. ^/dem, V. 151, 152. 

^/dem, v. 142, 143, 145, 150. */fl5f/w, V. 152, 153, 155. 

^Idem, V. 159, 212, 284, 619, 654. 

'^ Idem^ v. 160, 161, 164, 208-213, 620, 654. 


COLONIAL ISSUES (1740-17 74) 

at one-fourth of the value of the new money.^ 
Both of these acts received the approval of the 
English authorities.* The assembly desired to 
authorize another issue of ;£i28o, but to this the 
governor objected.^ During this year the bills 
that were cancelled amounted* to ;£i332 ; so that 
;£2 2,082 of old tenor bills probably remained in 
circulation. At the nominal rating of 4 for i, 
these would be equivalent to £S5^o in bills of the 
new tenor. 

In 1743, the legislature of Massachusetts pro- 
posed^ to the other New England colonies that 
commissioners should be sent to Worcester to 
devise a plan for common action in retiring the 
outstanding bills of credit. We do not know, 
however, whether such a conference ever occurred. 
The ;£25,CKX) loan authorized in 1742 was not 
placed in circulation until after the assent of the 
home government was received in August of the 
following year.* Silver soon rose^ from a price 
of 28^. in the middle of the former year to 32^. per 
ounce at the close of the latter. When the legis- 
lature met in May, 1743, the governor, being under 
the impression that the taxes of the previous year 
would call in all of the old emissions, urged that 
" a nice Enquiry '* be made as to the exact condi- 

1 Papers, V. 143, 145, 157, 159, 615, 620. 

*/dem, v. 654. A copy of one of these bflls is giyen by 
Bryant and Gay, III. 133. *Felt, 115. 

• Papers, V. 159, 616, 629. • Papers, V. 94, 654. 

*/dem, V. 161, 165, 181, 182. "^ Belknap, III. 225. 


tion of the old currency.^ He also said that pro- 
vision had been made for " exchanging all money 
of the old Tenor," if the taxes levied for sinking the 
old bills should prove insufficient* During 1743, 
bills of credit were emitted to the amount of 
;£i28o,^ and bills of old tenor amounting to £30S2 
were burned;* so that the currency of the prov- 
ince must have equalled ;£ 19,030 in old tenor 
and ;£3 1,000 in new.^ 

In 1744, renewed military expenses were in- 
curred, and the assembly clamored loudly for 
further emissions of paper, demanding at one time 
;£ 10,000 in a single issue.® In order to persuade 
the governor to consent to further emissions, a 
joint committee of the house and council was 
appointed ^ to draw up resolutions showing the 

1 Papers, V. 652. 

'This contradicts his first statement that the taxes for 1742 
would call in all of the bills. He evidently doubted whether they 
would suffice for that purpose. 

•These were in two issues of £y)0 and ;f930. Papers, V. 209, 
212, 670, 672. They seem to have been the ;f 1280 of blank bills 
which the legislature wished to emit in 1743. /</<?;», V. 159, 616, 
629. This made ;^6ooo new tenor issued for province expenses. 
See Idem, VI. 223. ^Idem, V. 204. 

•The jf 19,030 old tenor was equal to £47 $7 ^" "®^* There- 
fore the whole amount of currency was equivalent to ;f 35,75 7 in 
new tenor bills, or 1119,190. The population of the province at 
this time could not have been far from 20,000. In 1749 or 1750 
Douglass estimated it at 24,000. Summary, II. 180. 

» Papers, V. 239, 240, 248, 249, 720. 

"^/dgm, v. 238-239. Wentworth seemed at one time to be 
about to consent to the issue of bills in violation of his instructions. 
Idem, v. 242-243. 


COLONIAL ISSUES (1740-1774) 

necessity for such action. In the end, Wentworth 
consented to an act providing for the issue of 
;^5500, on the condition that it should not go into 
operation until the consent of the English author- 
ities should be secured.^ The writer is unable to 
find whether such consent was secured and the 
bills actually emitted. Wentworth had positive 
instructions not to consent to the emission of 
more than ;^6oc>o of bills for the expenses of gov- 
ernment,^ and brought these out in a controversy 
in 1 745, during which there was no mention of a 
violation of instructions in the previous year. 
Moreover, no issue of ;^5500 is included in a state- 
ment prepared by the assembly in 1753 concern- 
ing the paper issued during the previous decade.^ 
For these reasons the proposed emission will not 
be included in the writer's list of actual issues. 

During 1744, bills of the new tenor to the 
amount of ;£ii22 were burned by the assembly,* 
so that the new tenor money was reduced to 
;£29,878.^ Of the old tenor bills, £7J\ was can- 
celled in this year.® It will be well at this point 
to complete the story of the bills of credit of the 
old emissions. The reader will remember that 
the writer's figures showed that ;£22,6ii of old 
tenor money was in circulation in 1739, and 

1 Papers, V. 236, 251, 252, 551, 716, 722. 

* Idem, v. 279. 

«/</^^«, VI. 223-226. ^ Idem, V,2$o, 

^This is on the assumption that no bills were issued in 1744. 

•Papers, v. 250. 



;£i9,030 at the end of 1743; whereas the report 
of 1739 placed the outstanding bills at only 
;£i2,576, and Governor Wentworth thought that 
all the bills would be brought in by the taxes of 
the year 1742. The records show that, between 
1744 and 1754, inclusive, bills of credit of the old 
tenor were burned to the amount of ;£2i,30i.^ 
This is a complete demonstration that the writer 
has not overstated the amount of old currency out- 
standing in 1739 and 1743. 

At the opening of 1745, the price of silver was 
35^. per ounce, and it steadily increased as the 
year progressed.^ Preparations for the expedition 
against Louisbourg were now under way,^ and 
New Hampshire was called upon to furnish her 
quota of men. In order to raise funds, the repre- 
sentatives proposed* to issue ;^ 10,000 of bills which 
should be redeemed by taxes in ten annual instal- 
ments beginning in 1755. The council objected 
that the bill did not appropriate all of the money 

iThe list is as foUows : 1744, £*ni ; 1746, £\z^*j ; 1747, 
£MI\ 1748, ;f 342; I753,;f6733; 1754. jfu^S^S- See Papers, 
v. 250, 416, 526, 919, VL 221, 222, 250, 251, 252, 256, 257, 258, 
259, 261. The writer's figures showed that jf 19,030 was outstand- 
ing at the end of 1743. The fact that a larger sum than this was 
actually burned between 1744 and 1754 may have been due to the 
presence of counferfeit bills. If it is true that the issues of 1740 
amounted to jf 2700, as stated in Papers, V. 30, instead of ;f 2000, 
as given in the writer's statement, then ;^700 of thb excess of bills 
cancelled is accounted for. 

3 Belknap, III. 225. 

« See Winsor, V. 410 ; Belknap, II. 198-200. 

* Papers, V. 276-277 ; Belknap, II. 201. 

COLONIAL ISSUES (1740-1774) 

issued to the purpose of defraying the charges of 
the expedition, and that the taxes for redeeming 
the bills ought not to be postponed longer than 
1751.^ Then the governor sent the assembly the 
text of one of his instructions,^ by which he was 
ordered to consent to the emission of no more 
than j£6ooo of bills of credit. Wentworth sought 
counsel from Governor Shirley, of Massachusetts, 
and was advised to consent to the issue of paper 
without waiting for the royal approval, because 
the great emergency would justify his conduct 
in the eyes of the home government.^ After con- 
siderable wrangling concerning the terms of the 
bill,* an act was finally passed^ providing that 
;^i3,ocx) should be emitted, and that these bills 
should be redeemed by taxes between 1751 and 

The Louisbourg expedition proved more expen- 
sive than was expected, and more money was soon 
needed. In July of the same year, ;£6cxx) was 
issued.^ Then, in September, the house of rep- 
resentatives voted to emit ;^ 12,000 more, but this 
time the council refused to assent to such a meas- 
ure.® In October, however, the governor consented 

1 Papers, V. 278. « Idgm, V. 279. • Idem, V. 933. 

* Idem, V. 281, 282, 284-291. 

* Idem, v. 290, 291, 296, 742 ; Belknap, II. 201-202 ; Barstow, 


•In the address of 1753, the date of this issue is given as Febru- 
ary, 1744. The year of 1744-45 is undoubtedly meant. 
7 Papers, V. 334, 33^, 338» 348, 756, 757, 763, 767. 
•/^m, v. 377, 380, 773. 



to an issue of ;^8ooo that was to be redeemed by 
taxes in the four years following 1762.^ This last 
act contained a pledge that, if England should 
reimburse the colony for the expenses incurred 
in the last undertaking, the money thus granted 
should "be put into ye Treasury as a fund for 
the immediate calling in and sinking said Bills." 
The three emissions of 1745 aggregated £,27,000? 
and the new tenor money now in circulation 
amounted to ;^56,878 ; ^ so that the price of silver 
rose to 37J. per ounce.* 

In 1746, new expeditions were projected.^ Early 
in the spring it was proposed to issue ;£iSOO of 
new bills which should be redeemed out of the 
interest received on the ;£2 5,000 loan,^ but the 
records do not show that such action was 
authorized. In June it was decided to issue 
;^6o,ooo for the purpose of defraying the ex- 
penses of an expedition against Canada; and the 
assembly pledged that at its next meeting provision 
would be made for the redemption of these bills.^ 
This enormous emission more than doubled the 

1 Papers, V. 383, 384, 387, 405, 776, 779. 

* These are all mentioned in the report of 1753, in Idem, VI. 

*No bills of the new tenor were burned in this year. The 
;£"56,878 now in circulation amounted to seven or eight dollars per 

* Belknap, III. 225. 
^ Idem, II. 226-228. 

* Papers, V. 407, 412. 

^ Idem, v. 432, 433, 813, 817, 821, VI. 224-225. 

COLONIAL ISSUES (1740-1774) 

quantity of new tenor money in circulation,^ and 
the price of silver quickly jumped from 37^. to 5ar. 
per ounce.* In December, Governor Wentworth 
was constrained to request the legislature to " make 
ample satisfaction for the Deficiency " in his " sal- 
lary" caused by "the Depreciating of the Paper 
currency."^ Without much delay an act was 
passed* granting Wentworth ;^ 1000 for this pur- 
pose, which shows that the governor's complacency 
in allowing bills of credit to be issued secured for a 
time the good will of the assembly. 

The £60yOOO emitted in 1746 seems to have 
been left without any provision for its redemption 
except that the legislature promised ^ that, if Par- 
liament should reimburse the province for its 
expenses, the money thus granted should be 
applied to sinking the bills. During 1747, the 
currency continued to fall in value ; and the price 
of silver rose from 53^. to 60$". per ounce,^ as the 
full effects of the ;£6o,ooo emission began to be 
felt. Thus silver had risen from 27^., at the be- 
ginning of Wentworth*s administration in 1742, to 
60$". in the year 1747. In the face of this decline 
of the credit of the paper, the legislature proceeded 
to devise schemes for emitting more currency,^ and 

1 No bills of the new tenor were burned this year, and the cur- 
rency must have increased to ;f 116,878, or ^^5389,000, — more than 
|i6 per capita. * Ideniy V. 855. 

» Belknap, III. 225. * Idem, V. 435. 

• Papers, V. 846. • Belknap, III. 225. 

' Two projects were for emissions that should be redeemed solely 
R 241 


finally authorized the governor to issue enough bills 
to pay oflf the troops of the province.^ 

In 1742, when the bills of the new tenor were 
emitted, an act was passed which provided that 
the new currency should be accepted in all pay- 
ments at 6s. 8d, for an ounce of silver, and that in 
future years the value of the money should be 
regulated by the assembly in the fall of each year.^ 
It was also enacted that a severe penalty should 
be imposed upon any one who should ofifer to 
receive the bills at a lower rating, or to pay a 
premium for silver. In 1746, the judges of the 
superior court seem to have rated the bills at less 
than their nominal value, and in the following year 
the house of representatives ordered all the courts 
to adhere strictly to the rating established in 1742.^ 
Soon after this, an act was passed by the lower 
house reaffirming the valuation established in 
1742 for the bills of credit, but to this the council 
objected.* During 1747, only ;^2iio of new tenor 

out of funds that might be granted by Parliament. A third con- 
templated the issue of ;f 4000 redeemable by taxes to be levied in 
1761 and 1762. Papers, V. 546, 551, 556, 560, 561, 901. 

^Papers, V. 562, 563, 901. I am unable to determine whether 
any such bills were issued. They are not mentioned in the 
address of 1753. Idtm, VI. 223-226. Therefore I shall omit 

*Idemf v. 620. The provisions of this act may be inferred from 
the references in V. 501, 531, 554. 

^ IdeMy v. 501-502. This was probably not accepted by the 
council, otherwise the subsequent measures introduced into the 
house would have been needless. 

^Jditn, v. 531-532, 553-554. 


COLONIAL ISSUES (i 740-1 774) 

bills was burned,^ so that £1 14,778 of paper money 
was still in circulation.* 

In 1 748, it appears that the affairs of the £1 5,000 
loan authorized in 171 7 were not all settled, and 
the committee in charge of this business was 
ordered to hasten the adjustment of its accounts.^ 
Early in this year Governor Wentworth received 
from Governor Shirley a communication* stating 
that Massachusetts was considering a plan for 
retiring its outstanding bills of credit by means of 
the funds that Parliament intended to grant the 
colony in return for its expenditures during the 
late war. Shirley desired to have a conference 
appointed, by which all the New England prov- 
inces might devise "one general method or 
scheme"; but New Hampshire was not willing 
to consider the subject of redeeming its currency 
at this time.^ 

Douglass estimated the amount of New Hamp- 
shire currency outstanding in 1748 at ;£4SO,ooo 
"of old tenor value." ^ Since the ratio of old 
tenor to new was four to one, this sum would 

^ Papers, V. 525. 

^This makes no allowance for the possible issue in 1747, con- 
cerning which the author was unable to reach a definite conclusion. 

« Papers, v. 585. 

*/.i5r»i, v. 565-569. 

*See Felt, 1 19-120. 

' Summary, II. 528. Douglass converted the new tenor bills of 
New Hampshire into old tenor in order to have a common basis 
for comparison of New Hampshire's issues with those of other 



equal ;^i 12,500 in new tenor. The writer's 
figures show that ;^922 of new tenor bills were 
cancelled during 1748,^ so that the currency of the 
province was reduced to ;£ 11 3,8 56, an amount 
which agrees very closely with the estimate given 
by Douglass. This was a large enough figure to 
justify the remark of Douglass* that New Hamp- 
shire was "always inclinable to a depreciating 
fraudulent paper currency." In 1748, the price of 
silver fluctuated from 54J. to 58^. per ounce.^ 

In 1749, the governor and assembly became 
involved in a bitter dispute over the question of 
the representation of certain towns and the elec- 
tion of a speaker.* This lasted for several years 
and prevented all legislation ; so th^t the represent- 
atives were " incapable of augmenting their paper 
currency," to use the words of Douglass.^ By this 
time the London agent of New Hampshire had 
received about ;£30,ooo of money granted by 
Parliament to reimburse the province for its 
expenses in the late war. This money could not 
be invested because the agent had no authority to 
do so, and the province lost about £^QO sterling 
of interest money during each year that the 
quarrel lasted.® Since the price of silver now 

1 Papers, V. 586. ^ Summary, II. 193. 

8 Belknap, III. 225. 

*0n this quarrel see Papers, VI. 69-126; Belknap, II. 267-276; 
Douglass, Summary, II. 35-38; Greene, 151. 

^ Summary, II. 193. 

•Belknap, II. 273. The governor, of course, attributed the 
blame to the assembly. Papers, VI. 125. 


COLONIAL ISSUES (i 740-1 774) 

varied from 5df. to 60s, in old tenor money, the 
bills of the new tenor must have exchanged for 
silver at about iSs. in paper for one ounce of that 
metal.^ At this rate of exchange, the money 
granted by England would have been sufficient to 
retire a little less than ;^90,ooo of the outstanding 
new tenor bills,^ and the province could easily 
have withdrawn the rest by its regular taxes. 

In 1750, Massachusetts prohibited the further 
circulation within her borders of any bills of credit 
issued by New Hampshire, Connecticut, and 
Rhode Island.^ In the following year Parliament 
passed an act that forbade * any of the New Eng- 
land colonies to emit bills of credit and make them 
a legal tender. At length, in September, 1752, 
the dispute between the governor and assembly was 
terminated, and the business of law-making was 
resumed.* It was decided ^ to have the reimburse- 
ment money invested in public stocks, and to 
apply the interest realized from this investment to 
the redemption of the paper money.^ As no bills 
had been retired since 1748, and the currency 
amounted to ;^i 13,856, this could not be considered 
a violent measure of contraction. 

In 1753, the legislative mill was once more in 

1 Old tenor was worth one-fourth of the new tenor. 
*The sterling rating of silver was $s. 2d, 

• Felt, Massachusetts Currency, 122. 

* Stat, at Large, 24 George II. c. 53. 

* See Belknap, II. 276-277; Papers, VI. 127 et seq. 

• Papers, VI. 143, 147. 
^ Idem, VI. 227, 273. 



working order and ready for further experiments 
with the paper currency. The imperial statute of 
1751 had required that all outstanding bills should 
be punctually retired at the times appointed in the 
existing laws, and that none of them should be 
reissued. This called forth a protest from the 
legislature of the province, and an address to the 
King was adopted upon the subject.^ In this 
the members protested that the province was 
unable to redeem its paper as rapidly as required 
by Parliament, and petitioned that the time for 
retiring the ;^6o,ooo issued for the Canada expe- 
dition should be extended to 1766. They stated 
also that the taxes laid for redeeming bills of 
former emissions amounted to ;^38oo annually. 
The assembly voted ^ at this session to reissue^ 
;^ 1 2, 500 of bills that were then in the treasury. 
This money was to be used for defraying debts that 
had been accumulating during the late interregnum, 
and taxes were levied to call in the bills in five 
annual instalments, beginning in January, 1754. 
The new tenor bills cancelled in this year amounted 
to only ;^I93,* so that the currency stood at 
;^i 13,663. 

During 1754, the lower house of the legislature 
seems to have desired to get £6000 of the bills 

1 Papers, VI. 223-226. 

2 Idenif VI. 210, 211, 212, 225. 

* The discussions on p. 211 seem to make it clear that this was 
a reissue, although on p. 225 it seems to be mentioned as a new 
issue. * Idgm^ VI. 285. 


COLONIAL ISSUES (i 740-1 774) 

out of the treasury.^ The assembly proceeded to 
draw upon the interest of the funds in London in 
order to secure money to defray current expenses,^ 
but levied taxes that were intended to retire an 
equivalent amount of currency. At this time the 
bills of the ;£2 5,000 loan began to be cancelled, 
and the whole amount of new tenor money burned 
in the course of the year was ;£i4,i32.^ This left 
;^99,53i of new tenor bills in circulation. The 
province now reverted to the old practice of 
receiving commodities in payment of taxes,* 
although its paper currency was large enough to 
depreciate to only one-third of its original value. 
For the year 1754 twenty different commodities 
were made receivable at fixed ratings, and the 
practice was continued for a dozen years longer.^ 
The confusion in which the paper money had 
involved the province was increased by the unusual 
activity displayed at this time by those persons who 
were engaged in manufacturing counterfeit bills.^ 
In 175 s, counterfeiters who were operating with 
New Hampshire money were arrested in Rhode 

In January, 175 5, preparations were commenced 

^ I assume that this was the purpose of the act for granting 
;^6ooo mentioned in Papers, VI. 285. 
» Idem, VI. 285, 334. 

• Idem, VI. 270, 271, 272, 273, 274. 

• See Idem, V. 622, 684, VI. 151, 274. 

« Idem, VI. 378, 516, 591, 669-670, 712, 751, 870, VII. 39, 80, 

• Idem, VI. 14, 20, 28, 338, 35«-353» 372, 417, 453, 457, 641, 



by Shirley for an attack upon Crown Point,^ and 
New Hampshire was called upon for her quota of 
men.* The imperial statute of 1751 had expressly 
provided* that paper money might be issued 
"upon sudden and extraordinary emergencies of 
government," and Governor Wentworth finally 
assented to the emission of ;^40,ooo of new cur- 
rency in order to meet the expense of this expedi- 
tion.* These Crown Point bills were issued at a 
rating of fifteen shillings of paper ^ for one " Span- 
ish miird Dollar," ® so that they were practically 
a currency of a new tenor ; and they were to be 
redeemed by taxes at the end of reasonably short 
periods.^ Yet they depreciated so rapidly that 
silver rose from 60s. to /or. per ounce in old tenor 
currency during the course of the year,* and the 

1 See Winsor, V. 502. 

2 Papers, V. 355-357- 

* Stat at Large, 24 George II. c. 54, sec. 4. 

* This was in two issues of ;f 30,000 and ;f 10,000. Papers, VI. 
368, 376, 425. On these emissions see Belknap, II. 307; Hildreth, 
II. 450; Winsor, V. 590-591. A copy of one of these bills may be 
found in the work last mentioned. 

* This was 3J times the sterling value of the Spanish dollar, 
which was worth but 4J. 6d. At this valuation an ounce of silver, 
worth 5 J. 2d, sterling, would be rated at a little less than lys, ^d. in 
new tenor. 

® Thus the bill for five shillings, of which a copy is given by 
Winsor, is declared equal to one-third of a dollar. Winsor, V. 590. 
Cf. Belknap, II. 307. 

7 Thus the ;f 10,000 issued in September was to be redeemed in 
1760. Papers, VI. 425. 

® Belknap, III. 225. When bills of exchange were drawn in this 
year, the rate of exchange was at first ;f 3.25 Crown Point money 

COLONIAL ISSUES (1740-1774) 

pay of the soldiers had to be raised about eleven 
per cent^ The law of 1751 had absolutely for- 
bidden any province to make bills of credit a legal 
tender ; ^ and, therefore, the Crown Point bills were 
made receivable merely at the treasury of the 

Naturally enough, no old currency was cancelled 
during 1755; indeed, the records show that no 
more bills were burned until 1758. Governor 
Wentworth found that the paper money was use- 
less for expenses incurred outside the province,* 
and was hard pressed to secure sterling money for 
such purposes. From time to time the assembly 
found itself in need of an exportable currency, and 
drew upon the funds invested in London. Thus 
during 1755 and 1756, bills of exchange were drawn 
for ;£295o sterling; but in each case provision 
was made for retiring what was deemed an equiva- 
lent amount of provincial currency.^ In 1756, 
Wentworth arranged^ to borrow ;£3000 sterling 
from Governor Shirley of Massachusetts. Late in 
175 s, word was received from the governor of 
Connecticut that that province had outlawed all 

for £1 sterling; and later in the year it rose to £^.ys ^o' £^ step 
ling. Papers, VI. 376, 428. 

1 Belknap, II. 307. The pay was raised from ;f 13.10 to £i^. 

* Stat, at Large, 24 George II. c. 54, sec. 7. 

• See copy of bill given by Winsor. 

^ See his message of 1756. Papers, VI. 487. 
^/dem, VI. 376, 385, 410, 419, 428, 434, 435, 486. Besides 
these sums, ;f 300 was loaned at interest Idem, VI. 339. 
•/^/w, VI. 487. 



bills issued by New Hampshire, and had prohib^ 
ited them from being received in any payments 

In 1756, renewed efforts to raise troops were 
called for, and jC3S,7SO of new bills was printed 
from the plates used in the previous year.^ These 
were to be redeemed by taxes levied in 1759 and 
1761 ; and it was pledged that any money that 
should be granted by the King to reimburse the 
province for its expenses should be an additional 
fund for sinking the bills.* The new money was 
to have the same nominal value as that issued the 
previous year, but silver continued to rise in price 
until it reached lOOi^. per ounce.* As a result, 
the pay of the soldiers had to be raised from fifteen 
to eighteen pounds,^ and the governor requested 
the assembly to make good the depreciation of his 

In 1757, more men had to be raised; and the 
governor, although fearing ^ " bad consequences," 

1 Papers, V. 446. 

^Idgm, VI. 503, 516, 520. This was in two issues of £310,000 
and ;£^5750. The latter was made from blank bills printed the 
previous year. Idem, VI. 516, 531. 

* The text of this act may be found in Papers, VI. 506-508. 

^ Belknap, III. 225. Since the Crown Point money was given 
a nominal rating of ^^ times the value of sterling, the nominal 
value of silver in bills of the new tenor was nearly 17^. 3d, In 
bills of old tenor the price of silver would be four times as much, 
or 69J. per ounce. The difference between 69 and lOO shillings 
represents the depreciation of the new money. 

6 Belknap, II. 307. « Papers, VI. 543. 

■^ See his message. Id^m, VI. 565. 

COLONIAL ISSUES (1740-1774) 

felt obliged to consent to an issue of ;^20,ooo of 
additional currency.^ This was to be retired by 
taxes payable in 1761 and 1762, and any reimburse- 
ment money that might be received from the King 
was pledged as a second fund for its redemption. 
None of the ;^99,53i of new tenor bills outstanding 
in 1754 had been retired, and £9S,7SO of new 
currency had been issued in 1755, 1756, and 1757. 
The province had, therefore, about ;^i95,28o of 
currency in 1757, while its population probably 
did not exceed 55,000.^ The price of silver, there- 
fore, increased to nor., and this made it necessary 
to raise the pay of the troops for a third time.* 

In 1758, ;^20,5oo of additional paper was 
emitted,* and bills to the amount of ;^3536 were 
burned.^ The result was a net increase of ;^ 16,964 
in the currency of the province, while silver rose 
to 1205. per ounce.® In 1756, a second grant of 
money, amounting to ;£8ooo sterling, had been 
received from England and brought to this coun- 
try ;^ while in 1758 it was decided to draw upon 
the funds in London for ;^2000.* The sum thus 
drawn was to be made good by a tax of ;^i2,5oo, 
payable in the Canada bills issued in 1746, which is 

1 Papers, VI. 569-571. 

*For 1754, Mr. Bancroft estimated the population at 50,000 
whites and a few blacks. Bancroft, II. 389-391. 

• Belknap, II. 307, III. 225. 

• Papers, VI. 663, 665. The printed records give no information 
concerning the character of this issue. 

« Idem, VI. 640, 652. "^ Papers, VI. 543-545» 57^-579- 

• Belknap, III. 225. « Idem, VI. 643-645, 654. 



a recognition of a depreciation of more than six to 
one for the Canada money.^ In one of the gov- 
ernor's messages of this year, the attention of the 
legislature is directed to the old ;^i5,cxx> loan of 
1 71 7. Wentworth urged that an act should be 
passed "to oblige delinquent borrowers of the 
;^ 1 5,000 Loan to make speedy payment of the 
sums from them respectively due,'* * which showed 
that fifty years had not proved long enough to 
settle the accounts of this enterprise undertaken 
by the province. 

In 1759, the province issued ;£i 3,000, which 
was declared to be of sterling value, and was to 
be redeemed partly by bills of exchange drawn 
upon the funds in England and partly by taxes 
levied in 1762 and 1763;* and it is possible that 
further emissions were authorized during the course 
of this year.* These new bills differed from pre- 
vious issues in that they were emitted at sterling 
rates and supported by sterling funds.^ The prov- 
ince now had a rich variety of different kinds of 
money. In 1760, the assembly made another issue 

1 These bills were issued at proclamatioii rates. 

•Papers, v. 691. 

'The amount authorized was jfiy/xxx Idem^ VI. 712. But 
only ;f 13,000 was issued. Idem, VI. 774. 

^Idem, VI. 717, 726. The editor of the Provincial Papers 
saw fit to omit large parts of the Journals, so that it is impossible to 
determine whether these were new issues or reissues of old bills. 
See editor's note in VI. 320. 

^Note the plan outlined in resolutions of the assembly in 1758. 
Idem, VI. 679. 


COLONIAL ISSUES (1740-1774) 

of £iifOOO of sterling bills, bearing five per cent 
interest, and redeemable from the proceeds of 
taxes levied in 1763, 1764, and 1765.^ In 1761, 
the heavy military expenses of the colony came to 
an end with the emission of ;^20,ooo, probably in 
sterling bills such as had been issued in the two 
preceding years.* 

Thus New Hampshire, in a period of seven 
years, had issued no less than ;^i 16,250 of new 
tenor money,* and at least ;^48,ooo of sterling 
bills.* We have little information concerning 
these sterling issues. But they seem to have 
been hoarded to such an extent that they entered 
into circulation less than the other bills,^ and they 
were retired within a few years.® This fact, and 
the uncertainty whether the printed records con- 
tain a full account of the amounts of paper burned 
by the assembly, will make it impossible to form 

1 Papers, VI. 735, 744, 745, 752, 756, VII. 38. 

* Idem, VI. 779,786. 

•;f40,ooo in 1755; ;f35»750 i^ 1756; ;f 20,000 in 1757; and 
^20,500 in 1758. 

*The writer's figures are ;f 13,000 issued in 1759, ;f 15,000 issued 
in 1760, and ;f 20,000 issued in 1761. It is possible, as stated in a 
previous note, that there were two other issues or reissues in 1759, 
concerning which the records offer no certain information. 

^ Idem, VII. 65. The issue of 1760 certainly bore interest. 
Since all these issues were secured in whole or in part by sterling 
funds, they would naturally be hoarded to a considerable extent. 

®Thus in 1760 the sterling bills were made receivable for prov- 
ince rates. Idem^Nl, 733. By 1764 they had become so scarce 
that other bills were made receivable for taxes that had been pay- 
able originally in sterling bills. Idem, VII. 38. 




any very definite conclusions concerning the num- 
ber of bills circulating in this or in subsequent 
years. Belknap's tables show that the price of 
silver ranged from I2af. to I4cxr. per ounce in old 
tenor money between 1761 and 1763.^ In 1760, 
Governor Wentworth stated that a silver dollar 
exchanged for six pounds of the old tenor money ,^ 
a figure which agrees exactly with Belknap's quo- 
tations for the ounce of silver for that year. In 
1763, the assembly granted the governor ;^ 12 50 of 
new tenor money, which was declared to be equiva- 
lent to £,2QO sterling.^ This is a rate of £,6\ new 
tenor for £,1 sterling, and would indicate a rate of 
£y2^ old tenor for £,\ sterling.* 

But the bills were no longer a legal tender, and 
their ability to do harm was infinitely diminished. 
In 1762, the legislature authorized the issue of 
;£20,ooo of sterling bills,** of which ;^ 10,000 was 
to be used for sinking the Louisbourg and Canada 
bills emitted in 1745 and 1746. These old issues 
had aggregated ;£87,ooo, and had sunk to less 
than one-sixth the value of sterling,^ so that the 
;£i 0,000 of sterling money would probably suffice 

1 History, III. 225. « Papers, VI. 744. • Idem, VI. 878. 

.*This would give a price of about 129J. old tenor for an ounce 
of silver. 

^ Idem, VI. 844. Of this amount, ;f 20,000 was not issued until 
1763. Idem, VI. 869. Of the entire issue, ;f 10,000 was said to be 
outstanding in 1765, when bills of exchange were drawn in order to 
redeem it. Idem, VII. 65. 

^ Idem, VI. 655. They were made payable for a tax in 1758 
at a rate of 6} for I. 

COLONIAL ISSUES (1740-17 74) 

for exchanging all that now remained outstanding. 
In 1763, the records show that currency of various 
issues to the amount of ^^63,5 18 was burned.^ 

By 1764, the assembly seems to have learned 
something from the experience of the last few 
years, for we find ^ it expressing the opinion that 
" another Emission of a paper currency would . . . 
be fruitless and attended with mischievous conse- 
quences well known to every considering person 
the least acquainted with the circumstances of the 
Province." In a message written in 1 765, Governor 
Wentworth informed the legislature^ that all the 
paper money then outstanding must be retired 
"after the close of the year 1767"; and said that 
the province had incurred dishonor in the past by 
unreasonable neglect of its obligations. The as- 
sembly expressed the hope "soon to see an End 
of our Paper Currency."* Another sum of money 
recently received from England was devoted to the 
redemption of bills of credit;^ and a balance of 
;£i 2,000, remaining in London to the credit of the 
province, was devoted to the same purpose.^ It 
was enacted, furthermore, that in the future no 
bills of credit should be reissued when once 
received at the treasury.^ By the aid of the 
funds in England and the province taxes,^ large 

1 Papers, VI. 859, 860. Some of these amounts were sterling bills. 
* Idem, VII. 30. » /dgm, VII. 85. * fi/em, VII. 94. 

» Idem, VII. 53. • lifem, VII. 52, 65. ' /dgm, VII. 58. 

"Statistics of taxes imposed between 1753 and 1766 may be 
found in ColL of N. H. Hist. Soc, III. 152. 



sums of paper were retired in 1764, 1766, and 

Mr. Belknap tells us that, at length, "sterling 
money became the standard of all contracts"; 
while the paper passed " as a currency," its value 
being regulated "by the price of silver and the 
course of exchange." * The records enable us to 
describe some of the details of this process, which 
gradually resulted from the action of Parliament 
in preventing the issue of more legal tender paper. 
In 1765, the legislature passed an act^ "for ascer- 
taining the value of coined silver and Gold," by 
which the dollar was rated at six and the guinea at 
twenty-eight shillings. These were the same rates 
that had been established in Massachusetts in 1750. 
The law of 1765 seems to have been disallowed by 
the home government,* but the rating of six shil- 
lings for a Spanish dollar continued to prevail in 
the province.^ After the passage of this act, the 
outstanding paper was made payable for taxes at 
its " present value." ® 

1 Papers, VII. 32, 117, 150, 193. These sums amount to ;^4i,9o8 
nominal value, but some of them are expressed in sterling and 
others in new tenor di^ominations. Hence the total just stated 
does not represent the true value. 

« Belknap, II. 307-308. 

» Papers, VII. 77-78. 

^ Idem J VII. 281. The assembly proceeded, nevertheless, to 
grant supplies and levy taxes "according to the present current 
value of money Passing among us." Idem, VII. 282. 

^ Belknap says that a dollar was rated at six shillings from 1765- 
1776. History, III. 225. Note especially Papers, VII. 282-283. 

•/^^/«,VIL 80, 108. 


COLONIAL ISSUES (1740^1774) 

But the provision made for redeeming the paper 
in 1768 did not prove sufficient to retire all of the 
currency. Accordingly the treasurer was author- 
ized ^ to receive in public dues " any further Sum 
of said Bills that shall be offered," and the gov- 
ernor urged that another " Fund " should be estab- 
lished to redeem " the paper Bills of Credit of this 
Province that are yet passing as a currency solely 
upon the Reliance placed on the good faith of the 
Province, altho* they have some time since expired 
by law." 2 Early in 1770, ;£2092 of currency re- 
ceived at the treasury was burned in the presence 
of the legislature.* In December of the same year, 
the governor urged the assembly to consider ways 
and means of retiring the notes still outstand- 
ing ; * and finally the treasurer of the province was 
authorized to borrow the funds needed to redeem 
the paper that still remained in the hands of citi- 
zens.^ In 1 791, Belknap wrote :® "The year 1771 
was also distinguished by the abolition of paper 
currency. Silver and gold had been gradually 
introduced, and the paper had for several years 
been called in for taxes. The time limited for its 
existence being now come, it totally disappeared." 
In subsequent years small amounts of old bills 
were presented at the treasury.^ 

1 Papers, VII. 152. « Idem, VII. 187. 

» Idem, VII. 235-241. In 1769, £()O0O of old tenor bills had 
been presented at the treasury. Idintt VII. 215-216. 

* Idem, VII. 260. « Idem, VII. 263, 265. 

• History, II. 355. "^ Papers, VII. 302, 319, 351, 

S 857 


After New Hampshire ceased to issue bills of 
credit, the use of treasury notes was introduced, as 
had been the case in Massachusetts some years 
earlier.^ We have seen that the sterling bills 
issued in 1760 were really treasury notes, bearing 
interest at five per cent and redeemable out of the 
proceeds of taxes levied within a period of three or 
four years. Eight years later it was proposed ^ to 
authorize the treasurer " to issue Notes upon Inter- 
est to be Redeemed by the Province"; and this 
was actually done in 1770,^ when such notes were 
issued in order to sink the paper then outstanding. 
In 1 77 1, the treasurer was instructed to borrow 
£iSoo for the use of the province,* probably in a 
similar manner. Later in the same year the gov- 
ernor informed the assembly that a grant of 
£6oog sterling had been received from Parlia- 
ment in reimbursement of expenses incurred in 
the late war, and urged that this money be used 
for meeting the deficiencies of former years.^ This 
advice seems to have been followed by the passage 
of an act ® which provided for the redemption of 
treasury notes out of the proceeds of bills of 
exchange drawn upon the funds in London. In 
1774, other notes then outstanding were redeemed 
with money that was in the treasury.^ 

1 See Hutchinson's account of the introduction of treasury notes 
into Massachusetts. History, III. 9-10. 

3 Papers, VH. 156. » Id^, VII. 288. 

» /tfem, VII. 263, 265. • Idem, VII. 296. 

* Idgm, VII. 283. f Idem, VII. 363. 


COLONIAL ISSUES (i 740-1 774) 

The experience of New Hampshire with her 
colonial bills of credit resembles so closely that of 
the other colonies, that it is unnecessary to present 
a summary of the results that flowed from these 
experiments with paper money. One thing, how- 
ever, must impress the reader; and that is that, 
however disastrous the effects of New Hampshire's 
paper currency, the outcome would have been 
infinitely worse if the inflationists had not been 
controlled to a considerable extent by the royal 
governors and the statute of 175 1. If these influ- 
ences had not been felt, the issues of paper would 
have been swollen to a veritable deluge. Thanks 
to external pressure, the colony was finally re- 
stored to a specie basis, and the amount- of paper 
circulating in 1774 had probably become small. 
In 1775, therefore, the standard of value in New 
Hampshire was the Spanish dollar, at a rating of 
six shillings; and ^^133 of the currency of the 
province was equivalent to ^^loo sterling.^ 

^ Thus, in 1772, the legislature rated ;£^I40 provincial currency 
equal to 100 guineas. With the guinea rated at 21 shillings, as was 
the case after I7i7» this gives an exchange of £133*33 for ;f 100 




During the twelve years of peace and security 
that followed the close of the French and Indian 
War, New Hampshire enjoyed greater prosperity 
than had ever before fallen to her lot; and the 
population of the province increased until it 
amounted to about 82,000 souls in the year 1775.^ 
The abolition of paper money had made it possible 
to introduce some degree of order into the finances 
of the colony, but it cannot be said that New Hamp- 
shire was prepared for the struggle that was now 
before her. 

The annual expenses of the colony did not ex- 
ceed ;£3500 sterling,^ and taxation was proportion- 
ately light. The principal source of income was a 
tax on polls and estates,* which had existed in the 
province from the earliest times* and amounted in 

1 Belknap, III. 234. 

2 Adam Smith states it at this figure. Smith, W. of N., II. 154. 
In 1796, the expenses of the state were only $28,600, or ;f 6440. In 
1730, the ordinary expenses were stated at ;f 1500 for the regular 
charges of government and ;f 500 for contingencies. Coll. of N. H. 
Hist. Soc, I. 230. 

• For the methods of assessment see Acts of New Hampshire, 
29, 121, 172, 177, 178. The proportions of the various townships 
in a province tax in 1773 may be found in Papers, VII. 326-329. 

* Note Papers, I. 448. 



practice to an assessment of polls, real estate, and 
live stock.^ Duties on imports ^ had met with little 
favor in the colonial period of New Hampshire's 
history,^ and the only important branch of revenue 
besides the property and poll taxes was an excise 
on all liquors sold in the province.* In 1772, this 
was farmed out for ;£934.^ It seems always to 
have been subject to a great amount of evasion.^ 
Powder, or tonnage, duties were imposed upon 
foreign ships that entered the ports of the prov- 
ince,^ but the receipts from this source were in- 

Thus the burden of taxation in New Hampshire 
was extremely light, and the province had no 
revenue system^ adequate to the necessities of a 

iThus, in 1796, polls were rated at ;f 11,525, real estate at 
;f 15,531, live stock at ;f 12,882, and all other items at £S77* State 
Papers, Finance, I. 442. 

2 The excise on all liquors sold in the province included all 
imported liquors, and may have been referred to sometimes as 
an impost. See Papers, VII. 129. 

• Thusj in 1 716, the governor had recommended an impost, 
" which every Government in ye world doth but we." Papers, III. 
649. But the assembly replied that public charges could be met 
most conveniently by a tax on persons and estates. Idem, III. 651. 

• For the laws imposing the excise see Acts of N. H., 168-170. 
« Papers, VII. 236, 247, 261, 303. 

^Idem, III. 449, 554 ; VII. 139. 

7 Acts of N. H., 64. 8 Hill, 18-23. 

• With some allowances, the following passage, written in 1 730, 
gives a correct picture of the provincial finances at the outbreak 
of the Revolution: **The revenue arising within this province is 
three hundred ninety and six pounds, by excise, which is appro- 
priated towards the Governor's salary, and about three or four 



protracted war. Such an emergency was certain 
to be made the occasion for renewed issues of 
paper money, especially since the restraining in- 
fluence of the royal governor was now removed. 
Belknap states correctly the cause of the difficulties 
experienced by the state in the struggle for inde- 
pendence when he says : ^ " The war in which we 
became involved with Britain, found us not des- 
titute of resources, but unskilled in the art of 

When the question of financial methods was 
raised in 1775, the Provincial Congress resolved 
that the war could not be carried on without paper 
money; and wrote to the Continental Congress 
urging that " some general plan for bills of credit " 
should be adopted, or that the separate colonies 
should adopt some common scheme for regulating 
their own issues.^ Upon June 9,^ before any con- 
tinental bills had been emitted. New Hampshire 
decided to issue ;£ 10,050 of treasury notes. These 
were not made a legal tender, but were receivable 
at the provincial treasury. They were to be re- 
deemed by taxes in 1776, 1777, and 1778. Before 
the year closed, ;£30,ooo of additional notes was 
emitted upon a similar plan.* Some of the bills 

barrels of gun-powder, from the shipping, which is spent at the 
fort. There is no other revenue but by tax on polls and estates." 
Coll. of N. H. Hist. Soc., I. 230. 

1 Belknap, II. 425. Cf. also pp. 425-434. 

3 Papers, VII. 481, 483. 

^Idern, VII. 5 10 ; Belknap, II. 396. 

* Papers, VII. 549, 638 ; Belknap, II. 396. 


thus issued bore interest,^ but this provision was 
soon repealed.^ Persons who should counterfeit 
the paper were to be punished as "Enemies to 
their Country." » 

Upon the whole, during this year, the province 
seemed to desire to pursue a fairly conservative 
course respecting its paper issues. These treasury 
notes might not have depreciated if the war had 
proved to be of short duration, and the legislature 
did not at this time perpetrate wholesale robbery 
under the guise of a tender law. The regular 
province tax of ;£4000 was levied as usual,* and 
it was undoubtedly intended to collect punctually 
the taxes levied in order to redeem the paper. New 
Hampshire, unlike some of the other colonies, did 
not expect that the war could be carried on by the 
issue of paper money unsupported by taxation. 
Bartlett and Langdon, the delegates of the prov- 
ince to the Continental Congress, warned their 
constituents that ruin would result from " emitting 
paper on every occasion " ; and regretted the course 
of the legislature in making the third emission of 
treasury notes.^ In December, New Hampshire 
received from Congress a grant of $40,000 of con- 
tinental money.® 

In the opening days of 1776, a committee was 
appointed to devise " a Plan for sinking the Colony 
Debt," ^ but before the end of January it was de- 

1 Papers, VII. 510, 550. * Idem^ VII. 551. 

2 Idem, VII. 575. * Idem, VII. 609. 
^Idem, VII. 615, 631. • Idem, VII. 681. ^ jr^em, VII. 706. 



cided to make a new issue of ;£20,(X)8.^ These 
bills were declared a lawful tender " at the Treas- 
ury and all other payments," and the taxes levied 
for their redemption were not to be collected until 
1783 and the three subsequent years. It is worth 
while to call attention to the fact that the long 
postponement of the time of redemption and the 
first tender act came at the same time, and that 
this was just the period when the first difficulties 
were being encountered in maintaining the credit 
of the paper currency in most of the states.^ 
Later in the year, the legislature made an attempt® 
to secure gold and silver in exchange for its notes. 
By June, it became necessary to pass more strin- 
gent laws against counterfeiting.* 

During the month last mentioned, $io,(XX) was 
received from the federal treasury ; ^ but the prov- 
ince voted to issue ;£3400 of fractional currency,^ 
which was made a tender in all payments. At 
about the same time, the continental bills of credit 
and those issued by other colonies were made a 
legal tender,^ and a refusal of the paper currency 
was made punishable by the forfeiture of the entire 
debt.^ Thus, as Belknap says,® the "fraudulent 

1 Papers, VIII. 51, 60, 61. 

2 See Sumner, Financier, I. 48 et seq, 'Papers, VIII. 135, 176. 
^Idem, VIII. 144, 184. For other references on counterfeiting 

see VII. 551; VIII. 404»494» S^S* 5^6, 532, 54i» 54^, 554, 55^, S^a* 
5^, 599f 600, 603, 694, 724. » Idem, VIII. 168. 

• Idem, VIII. 169. ' Idem, VIII. 144. 
B This is Belknap's statement. History, II. 426. 

• Idem, II. 427, 



debtor took advantage of the law to cheat his 
creditor, under colour of justice " ; while hawkers 
" who crept from obscurity and assumed the name 
of merchants, could even increase their substance." 

In July, the legislature of the newly formed 
state of New Hampshire issued £20,160 of new 
bills of credit ; ^ and two months later a state tax 
of ;£25oo was levied upon polls and estates.* 
Thus, at the end of 1776, the state had emitted 
;^83,6i8 of paper currency,^ practically all of 
which was in circulation;* while the volume of 
continental money had swollen to $25,000,000.^ 
When the next year opened, this mass of paper 
had depreciated to about two-thirds of its nominal 

Price conventions and price regulations were 
now in order, and New Hampshire was repre- 
sented at a conference of the New England states, 
which was held at Providence from December 25, 
1776, to January 2, 1777.^ By this convention, 
the rising prices of labor and commodities were 
attributed to avarice, and a price tariff for all New 

1 Papers, VIII. 190; Belknap, II. 467. 
« Papers, VIII. 331. Cf. pp. I43-I44- 

• These figures of the writer agree exactly with a statement that 
may be found in Idem, VIII. 588. 

* In January, 1776, the legislature voted to bum £1 128 of interest- 
bearing treasury notes, but the records do not enable us to deter- 
mine whether this was actually done. Idem, VIII. 56. 

» Cf. Bullock, 130. « Idem, 133. 

' Papers, VIII. 406-407; Sumner, Financier, I. 55; Bullock, 
127; Hildreth, III. 181. 



England was prepared. Soon after this, New 
Hampshire established a legal scale of prices;^ 
and, later on, laws were enacted against " monopoly 
and extortion."* Congress now asked the states 
to issue no more paper, and to withdraw the bills 
already issued.^ New Hampshire voted to call 
in "all the Bills of Credit issued in 1775 " ;* and, 
in September, reorganized her system of taxation.^ 
It was decided also to ask from Congress a loan 
sufficient to enable the state to withdraw all the 
bills issued in 1775 and 1776.® 

But in January, 1777, it was considered neces- 
sary to authorize the treasurer to issue interest- 
bearing notes to the amount of ;£30,ooo,^ so that 
the currency was increased to about ;£iii,8cx).® 
The depreciation of the paper continued until, by 
the close of the year, the currency was worth but 
one-third of its nominal value,^ and this, too, despite 
the fact that other price conventions were con- 
vened to remedy the evil.^^ In November, a tax 

1 Papers, VIII. 455-456, 471. ^ Belknap, II. 427-428. 

• Journals of Congress, Feb. 15, Nov. 22, 1777. 

• Papers, VIII. 587. » Idem, VIII. 685. 

• Idem, VIII. 588, 589. 7 Idem, VIII. 454, 465, 588. 

' The total issues now amounted to ;f 113,568. But £l^AA of 
the bills had been burned in April, 1777, so that no more than 
;^i 1 1, 824 could have been in circulation. Idem, Will, 537. If 
the £ii2S, mentioned in a previous note, was actually burned in 
1776, the amount of outstanding bills would be slightly less than 

» See official rates adopted in 1780. Idem, VIII. 858. Cf. 
Bullock, 133. 

10 Sumner, Financier, I. 60, 65; Hildrcth, III. 227, 232. 


of £^o,ooo, payable " in all bills of this State/* 
was levied ; and it was resolved that the ** paper 
bills shall not be legal tender for debts after the 
first day of March next ensuing."^ Finally, on 
November 22, Congress made its first requisition 
upon the states, and called upon New Hampshire 
for $200,cxx>.2 

At the opening of 1778, the paper money had 
sunk to rather less than one-third of its nominal 
value ;^ but, in March, the legislature voted to 
issue ;£40,ooo of the treasurer's notes, payable in 
four years with interest at six per cent.* At the 
same time a tax of jQSo^ooo was levied,^ and 
;£6o,0O0 of this amount was appropriated to the 
payment of the requisition made by Congress in 
the previous year. But the sum thus set aside for 
federal purposes could not have been collected 
at the appointed time, for New Hampshire made 
its first payment into the federal treasiu'y at the 
very end of 1779.^ At the close of 1778, the state 
must have had about ;£ 15 1,000 of its paper out- 
standing ; ^ and the depreciation of the paper cur- 
rency had reduced its value to eleven or twelve 
cents on the dollar.^ 

1 Papers, VIII. 722, 723, 724. 

* Idem, VIII. 728-729; Journals of Congress, Nov. 22, 1777. 
» Papers, VIII. 858; BuUock, 133. * Papers, VIII. 779. 

* Identt VIII. 778-779. • State Papers, Finance, I. 59. 
^ This includes the ;f 40,000 of treasurer's notes authorized in 

March. During 1778, some bills were burned, but the printed rec- 
ords do not enable us to determine the amount. Papers, VIII. 762. 
8 Idem, VIIL 858; Bullock, 133. 


During 1779, the treasurer was authorized to 
borrow ;£70,ooo for the use of the state.^ The 
writer has been unable to ascertain the character 
of the obligations issued at this time,^ but it seems 
probable that the legislature was attempting to 
find some financial device * that would prove less 
dangerous than the emission of more bills of credit. 
In 1780, a loan of ;£300,ooo, at interest, was au- 
thorized.* From what we know of the manner in 
which the interest-bearing certificates of the fed- 
eral government found their way into circulation,* 
it seems certain that New Hampshire's currency 
must have been increased by the obligations issued 
in 1779 ^^d ^780. 

Congress made three requisitions for money 
during 1779.* In March, New Hampshire levied 
a tax for ;£250,cx)0 ; ^ and, in the following Decem- 
ber and January, the state paid into the federal 
treasury $600,000 of continental currency, for 
which a credit of ^^54,5 12 in specie was received.® 

1 Papers, VIII. 823, 842. 

'The writer has had access only to the Provincial and State 

» The first of these two loans was to be contracted for one year, 
and was to bear interest 

* Papers, VIII. 868. Since the currency was then worth about 
one cent on the dollar, this sum amounted to no more than ;f 30cx> 
in specie. 

^ E^.t note the manner in which the loan office certificates found 
their way into circulation. Bolles, I. 260-261. 

•Journals of Congress, Jan. 2, May 21, Oct. 6, 1779; Bullock, 
158. "^ Papers, VUI. 823, 

• State Papers, Finance, I. 59. 



In March, 1780, $scx),cxx) more of the paper was 
paid in by New Hampshire, and an additional 
credit of jii2,5(X) was obtained.^ Thus, on these 
early requisitions, the state furnished the federal 
government with $i,300,cxx) of depreciated paper, 
which was rated at $123,948 in specie.^ 

In 1780, when Congress passed the 40 for i 
act,^ New Hampshire voted to redeem its quota 
of the continental bills and to repeal its tender 
acts.* Within eighteen months the state paid into 
the federal treasury $5,2CX),ooo of continental 
paper, the whole amount of its quota, for which a 
credit of jii30,(XX) in specie was received.^ Ham- 
ilton's report of 1790 leads us to infer that the 
state issued $145,000 of bills of the new tenor, in 
place of the old money turned over to the federal 
authorities.® In April, 1780, a table of deprecia- 

^ State Papers, Finance, I. 59. 

* This was more than its real value, since the tables of deprecia- 
tion established by Congress did not tell the whole truth. Bullock, 

* Journals of Congress, March 18, 1780; Finances of the United 
States, 136-138. This act called upon the states for taxes to re- 
deem the continental money, which was declared to be worth only 
one-fortieth of its face value. When the old money was paid in, 
bills of a new tenor were to be issued to an amount not exceeding 
one-twentieth of the face value of the old emissions, ** on the funds 
of individual states." Six-tenths of the new bills were to be at the 
disposal of the states, and the rest were to be *< subject to the orders 
ofthe United States." 

* Papers, VIII. 856. 

•State Papers, Finance, I. 58. 

* This states that the bills of the new tenor issued on the funds 
of New Hampshire, and appropriated to the use of the United 



tion was adopted for use in the settlement of army 

The old currency now disappeared from circula- 
tion. In August, 1 78 1, the state imposed a tax 
of |! 1 00,000, payable in "bills of the new emis- 
sion."* A month later an act was passed^ "for 
making Gold and Silver a Tender for all Debts " 
and for settling the depreciation of the paper cur- 
rency. This rated the dollar at six shillings.* 
Early in 1782, the treasurer was authorized "to 
hire ;f 20,000 in specie, and to give Notes on 
Interest for any sums demanded of him by virtue 
of an order from the President." * This was prob- 
ably the same plan that was followed in the loans 
of 1779 and 1780. In June, Robert Morris's notes 
and the bills issued by the Bank of the United 
States were made receivable for all taxes as the 
equivalent of specie.* 

New Hampshire had become dissatisfied with 
the apportionment of her quota of the requisitions, 
and claimed that she was made to bear more than 
her just share of the public burdens.^ For this 
cause, or for some other, her compliance with the 
financial demands of Congress now became partial 
and reluctant. From 1781 to 1788, the state paid 

States, amounted to |(58/xx). This was four-tenths of the total. 
State Papers, Finance, I. 58. See resolutions adopted in 1780. 
Papers, VIII. 876-877. 

1 Papers, VIII. 858. ^Idem, VIII. 913. 

« Idem. , * Dip. Corr. of Rev., XII. 91. 

» Papers, VIII. 931. • Idem, VIII. 945. 

''Journals of Congress, April i, 1782. 


into the federal treasury $35,630 in specie, and 
$86,474 in indents, leaving unpaid balances of 
$216,625 in specie and $253,146 in indents.^ 

The Revolution had left New Hampshire with 
a debt that was considered a heavy burden. One 
estimate, probably unreliable, places it at $500,000 
in 1784.^ In 1782, it was decided to allow holders 
of the obligations of the state to bring them to the 
treasury and have them liquidated according to the 
legal scale of depreciation.^ When this should be 
done, the treasurer was instructed to issue specie 
certificates for the principal of the debts and for 
accrued interest. In the course of six or eight 
years a considerable part of the indebtedness was 
paid off,* so that in 1790 the remaining debt 
was estimated at $300,000.^ Of this, $282,595 
was finally assumed by the United States.^ 

New Hampshire did not escape the paper-money 
mania that raged in so many of the states in 1785 
and 1786.^ In the former year various conferences 
that were held to consider the subject demanded 
"a new emission of paper bills, funded on real 
estate, and loaned on interest." And this hap- 
pened, be it noted, when so much of the paper 

1 State Papers, I. 56-57. 
*Ford, Writings of Jefferson, IV. 139. 
•Papers, VIII. 926. 
^ Barstow, 269, 293; Belknap, II. 461. 
* State Papers, Finance, I. 29. 
•Tenth Census, VII. 327. 

^On this subject see Belknap, II. 461-477; Barstow, 269-272; 
Hildreth, III. 473; libby, 7-1 1, 52-54. 


formerly issued was in circulation that the depre- 
ciation was sixty per cent on the notes and twenty 
per cent on certificates of indebtedness.^ As a 
remedy for the discontent, the legislature of the 
state passed a law that enabled debtors to offer 
real or personal property " at a fair valuation " in 
satisfaction of their engagements. But this act, 
which remained in operation for five years, did not 
quiet the agitation for more paper money. On 
the contrary, it simply made specie more scarce 
than before. 

A paper-money party was formed in 1786, and 
the newspapers teemed with discussions of the 
necessity of issuing more currency in order to 
stimulate industry and relieve the poor. Concern- 
ing these fulminations, the New Hampshire Mer- 
cury observed* that "there is no single trace of 
any idea of redemption, or any one attempt to give 
the currency a foundation; but the whole seems 
predicated on a supposition that the general court 
by a mere act of legislation . . . could impress 
an intrinsic value upon paper." The inflationists 
claimed that " Paper money, or even leather but- 
tons, when stamped by authority and funded with 
realities, will answer for internal commerce as well 
as silver and gold.*'^ Finally, Belknap wrote:* 
" The same party who were so zealous in favor of 
paper currency, and against laws which obliged 

1 Belknap, II. 462. 

«Coll. of N. H. Hist. Soc., III. 117-118. 
• libby, 53. * Belknap, II. 467. 



them to pay their debts, proceeded to inveigh 
against Courts and lawyers." 

When the legislature met in 1786, paper money 
straightway became the principal subject of con- 
sideration ; and finally a plan was formed for the 
issue of ;£50,ooo of paper, which was to be loaned 
upon mortgage security at four per cent interest, 
and should be a legal tender in all payments. 
This scheme was submitted to the various towns 
for consideration, but the inflationists were not 
satisfied with this concession. Accordingly, they 
proceeded to gather in Rockingham County, and to 
march to Exeter, where they tried to intimidate 
the legislature. This movement proved a ridicu- 
lous fiasco ; and, in January, 1787, the towns voted 
against the projected issue of paper money. Recent 
investigations have shown ^ that in New Hamp- 
shire, as elsewhere, the men who conducted the 
agitation for paper money in 1786 were the oppo- 
nents of the Federal Constitution, when the ques- 
tion of its ratification was under discussion in 1788. 

iSeelibby, 54. 



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Acts of New Jersey. Edited by P. Wilson. Trenton, 1784. 

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Acts of North Carolina. Newbem, 1773. (Acts of N. C.) 
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American Historical Review. (Amer. Hist. Rev.) 
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American State Papers, Finance. Washington, 1 832-1859. 

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Andrews, £. B. Institutes of Economics. Boston, 1889. 
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History of the Last Quarter Century in the United States. 

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Annals of American Academy of Political and Social Science. 

Annals of Congress. Washington, 1834-1837. (Annals of 

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Arnold, S. G. History of Rhode Island. Third edition. 

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Ashley, J. Memoirs concerning the Trade and Revenues of 

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Atlantic Monthly. (Atl. Month.) 

Baird, H. C. Criticisms on the Financial Policies of the 

United States and France. Philadelphia, 1875. (Baird.) 
Bancroft, G. History of the United States. Author's last 

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A Plea for the Constitution of the United States. New 

York, 1886. Reprinted in Sound Currency, V. (Ban- 
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Bankers' Magazine. (Bank. Mag.) 
Barry, J. S. History of Massachusetts. Boston, 1855-1857., 

Barstow, G. History of New Hampshire. Cbncord, 1842. 

Basset, J. S. The Constitutional Beginnings of North Caro- 
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The Regulators of North Carolina. In Annual Report of 

American Historical Association, 1894. Washington, 

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Bates, F. G. Rhode Island and the Formation of the Union. 

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Belknap, J. History of New Hampshire. Philadelphia, 1784. 

Benton, T. Thirty Years' View. New York, 1854-1856. 

Blaine, J. G. Twenty Years- of Congress. Norwich, 1886. 

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Bradford, W. History of Plymouth Plantation. Boston, 

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^eck, S. Historical Sketch of the Continental Paper Money. • 
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Bryan, A. C. State Banking in Maryland. Baltimore, 1899. 

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Budd, T. Good Order established in Pennsylvania and New 
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Carroll, B. R. Historical Collections of South Carolina. 

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•• Act of 1873," 111-112. 

Adams, H., petitions for relief, 227. 

Adams, J., quoted, 63-64. 

Agitation for retention of the green- 
backs, 101-102. 

Allen, W., a noted Greenbacker, 

Auditors, to examine accounts 
against North Carolina, 19a 

Baird, H. C, quoted, 103. 

Bancroft, G., quoted, 57 ; on paper 
money and the Constitution, 75. 

Banks, colonial, 29-33; banks of 
the United States, 81, 83, 90; 
state banks of issue, 80-92; 
abuses perpetrated by state 
banks, 82-92; introduction of 
sounder methods, 91-92 ; condi- 
tion of state banks in i860, 92- 
93 ; issues of state banks taxed 
out of existence, loi; national 
banking system created, loi; 
banks in North Carolina, 200- 
202; banking scheme in New 
Hampshire, 223-224. 

Barter currency, 7, 9-11, 125-127. 

Belcher, governor of New Hamp- 
shire, 219 et passim, 

Belknap, J., quoted, 226, 256, 257, 
262, 264, 272. 

Benton, T. H., quoted, 8a 

Bills of credit, see " Paper money," 

Bimetallism, in colonial times, 24- 
28; imder the Constitution, 79- 
80, 94-96, iio-in. 

" Bland-Allison Act," 112. 

Bland, R., quoted, 113. 

BoUman, E., quoted, 90. 
Bonds, proposal to redeem United 
States bonds in greenbacks, 100- 


Breck, S., quoted, 70. 
Burrington, governor of North 

Carolina, 126, 127, 134, 139. 
Butler, B., quoted, 103. 

Calhoun, J. C, on paper money of 
North Carolina, 202. 

Carey, H. C, quoted, 103. 

Chase, S. P., action of, in 1861, 96 ; 
doubts existence of depreciation, 

Cheap money, reasons for agitation 
in the United States, 1-5; desire 
for, must decline, 120-121. 

Coins, clipping of, 16-17; over- 
valuation of, 18-23. 

Congress, Continental, its policy 
determined by the several colo- 
nies , 60-63 ; unable to levy taxes, 
64; repudiates paper money, 

Contraction, policy of, in 1866, 99. 

Cooper, P., quoted, 104; nomi- 
nated for the presidency, 106. 

Counterfeiting, 132, 134, 140, 153, 
168, 172, 187, 188, 208, 212, 227, 
247, 263, 264. 

Debenture notes in North Caro- 
lina, 171, 173, 181. 

Debt, of North Carolina, 193, 199; 
of New Hampshire, 271. 

Defaulting sheriffs, in North Caro- 
lina, 178. 



Depreciation, of colonial coin cur- 
rency, 33-33 ; of colonial paper 
money, 39-40; of continental 
paper, 64-65 ; of bank notes, 86, 
93; of the greenbacks, 97-98; 
of North Carolina's currency, 

130. 133. 13s. 136, 137. i43» 154, 
157, 161, 164. 188, 189, 190, 194, 
196, 303; of New Hampshire's 
currency, sio, 311, 313, S15, 318, 
333, 3s6, 335, 340, 341, 344, 348, 
350, 351, 354, 365, 366, 367, 370. 

Discussions of monetary questions, 
31, 51-56, 67-68, 89-90, 103-104. 

Dobbs, governor of North Caro- 
lina, 160, 163, 164, 165. 

Dollar, the Spanish, 17-18 ; ratings 
of, by colonies, 18-33 1 ^® pres- 
ent dollar, 79; in North Caro- 
lina, 174-176, 191. 

Douglass, W., quoted, 15, 34, 35, 

47. 48. 50. 53. 55. 36. 145. ao9. 
330, 343, 344. 

Edenton, protests against paper 

money, 194. 
English creditors, lose by colonial 

paper money, 164, 173. 
Engrossing, 67. 
Exchange, quotations of, 39-40, 

131, 137, 143, 150, 164, 165, 169, 
175, 183, 183, 359. 

Exportation of money prohibited, 

Exports and imports of North 

Carolina, 167-168. 

Federal Constitution, opposed by 
advocates of paper money, 76- 
78. 197-198, 273. 

Franklin, B., quoted, 50, 54, 55, 59, 

Free coinage of silver, advocated 
in 1876, in; reasons for move- 
ment, 113; culmination of move- 
ment in 1896, 115; nature and 
probable future of movement, 

Fysack, quoted, 15. 

Gallatin, A., on Pennsylvania " re- 
lief," 87. 

Glenn, governor of South Carolina, 

Gold, as currency in colonial times, 
13-38; production of, 13; and 
our national coinage system, 79- 
80, 94-96, iio-iii; in North 
Carolina, 138-139, 174-176, 191 ; 
in New Hampshire, 356, 359. 

Greenbacks, see " Paper money." 

Hamilton, A., quoted, 83, 83. 
Hayes, R. B., elected governor of 

Ohio, io6 ; vetoes " Bland-Allison 

Act," I IX 
Hostility to Great Britain, caused 

by prohibition of paper money, 

44-45, 58-59. 
Hutchinson, T., quoted, 41, 43. 

Indigo notes, 183. 

" Inflation Bill," vetoed by Presi- 
dent Grant, 105. 

Inflation, caused by paper money, 
38-39, 64-65, 68, 86-89. 

Inspectors' notes, 157-158, 183. 

Iredell, J., quoted, 183, 188. 

Issues of bills of credit by New 
Hampshire incorrectly stated, 
338-330, 338. 

JeflFerson, T., quoted, 73. 

Job, political, involved in paper 
issues, 154. 

Johnston, governor of North Caro- 
lina, 137, 141, 143, 147, 151. 

Kelley, D. D., quoted, 104. 
Kentucky " relief," 88. 
Knox, J. J., statement concerning 
•• Act of 1873," iia 

Laughlin, J. L., on causes of the 
free silver movement, 113. 

Legal tender laws, in colonial 
times, 37-38 ; of the revolution- 



aiy period, 66-68; in North 
Carolina, 129, 131, 186; in New 
Hampshire, 222, 234, 242, 264. 

Loan banks, 34-35. 36, 37, 45, 46, 
86, 136, 153, 211, 234. 

London merchants, complain of 
paper currency, 164. 

Lottery, continental, 64. 

Madison, J., quoted, 74, jj^ 195. 

Martin, governor of North Caro- 
lina, 172. 

Mather, Cotton, quoted, 51. 

McCulloch, H., quoted, 84. 

McKinley, W., advocates free coin- 
age of silver, iii ; on " Sherman 
Act," 115. 

Mint, New England, 18. 

Moir, J., quoted, 149. 

Murray, J., issues circulating notes, 

National Greenback Party, its his- 
tory, 106-108. 

New England colonies, bills of four 
colonies circulated promiscu- 
ously, 209, 216; plans for re- 
deeming paper by common 
action, 235, 243. 

New Hampshire, issues paper in 
1709, 207 ; and continues to make 
such issues, 207, 211, 214, 215, 
216, 217, 219, 225, 232, 234, 239, 
240, 246, 248, 250, 251, 252, 253, 
254; issues paper during the 
Revolution, 262-269. 

New Hampshire Mercury ^ quoted, 

New tenor issues, 38, 72-73, 152, 
234, 269. 

North Carolina, a poor colony, 
127-128; passes acts regulating 
coin currency, 128-129; issues 
paper money, 129 et seq.; con- 
tinued issues, 130, 134, 136, 140, 
142, 152, 158, 165, 171, 173; is- 
sues paper during the Revo- 
lution, 186-190; payments on 

requisitions of Congress, 192- 
193; issues paper in 1783 and 
1786, 193-197 ; engages in losing 
speculation in tobacco, 195-196; 
attitude of the state toward the 
Federal Constitution, 197-198 ; 
charters banks to redeem its 
paper, 200-202; results of its 
paper-money policy, 203-204. 

Ogilby, T., quoted, 15. 

Paine, T., quotejl, 35, 48, 53, 54^ 
Paper money, fsjuud bjf lliB'^colo- 
nies for public expenses, 32-34 ; 
issued upon loan, 34-35 ; abuses 
attending colonial issues, 35-41 ; 
depreciation of colonial paper, 
38-41; end of colonial issues, 
44-45; a political issue, 46-49; 
opposed by merchants and prop- 
ertied classes, 49-51; arguments 
concerning, 52-56; Revolution- 
ary issues, the continental bills 
of credit, 61-73; opposed by 
the propertied classes, 63 ; issues 
steadily increased, 64; attempts 
to force its circulation, 66; 
evils that it produced, 68-71; 
bills " of a new tenor," 72-73 ; 
paper issued in 1785 and 1786, 
73; opposition to paper money 
in constitutional convention, 75 ; 
and the adoption of the Consti- 
tution, 76-78; issued by United 
States in 1862, 96-97; cost of 
Civil War increased by the 
greenbacks, 98-99; evils pro- 
duced by greenbacks, 99; agi- 
tation for permanent paper 
currency, 99, loi; discussions 
concerning, 102-104; leads to 
formation of the Greenback 
Party, 105-108; retirement of 
greenbacks prohibited, 108; is- 
sued by North Carolina, 129 ei 
seq.; issued by New Hampshire, 
207 et seq. 



Parliament, opposes inflation of 
colonial currencies, 19-21, 44, 
58-59, i68, 245. 

People's Party, 109. 

Pickering, T., quoted, 77. 

Pownall, T., quoted, 51. 

Price conventions, 66, 965. 

Quarrels between governors and 
colonial assemblies, caused by 
paper money, 43-44, 4^7. '43. 
149, 166, Z79-180, 318, 321, 224- 

Quit rents, 125, 127, 133, 143, 151. 

Ramsay, D., quoted, 73. 

Rated commodities of North Caro- 
lina, 126, 130, 131, 133. 

Regulators of North Carolina, 169, 
170, 171, 172. 

Repudiation, 41-42, 71-72, 155; 
threatened, zoi, 15a 

Reserves, of state banks, 93. 

Resumption, in colonies, 41-42; 
" Resumption Act " of 1875, io8, 

Rowan, M., governor of North 
Carolina, 158-159. 

Scarcity of money, complaints of, 
2. 14, 38, 52, 82, 89, 169, 211, 271- 

Sectional distribution of votes on 
monetary questions, 106, 107, 109, 
113, 116-119. 

" Sherman Act," 114. 

Silver, as currency in colonial times, 
13-28; production of, 13; and 
our national coinage system, 79- 
80, 94-96, iio-iii; in North 
Carolina, 128-129, 174-176, 191; 
in New Hampshire, 256, 259. 

Smith, A., quoted, 2. 

Stay laws, 87-88. 

Sumner, W. G., quoted, 5, 88. 
Supreme Court, on paper money 
and legal tender, 75, 86, 104-105. 

Taxation, opposition to, fostered 
by colonial paper money, 56-58 ; 
states refuse to levy taxes for sup- 
port of war of independence, 64 ; 
bad SjTStem of taxation in North 
Carolina, 177-178, 184; North 
Carolina reluctant to levy taxes, 
185, 186, 187; property taxes in 
North Carolina, 192; in New 
Hampshire, 961, 267. 

Tobacco notes, 158. 

Treasury notes, 45, 162-163, 258. 

Trumbull, J., quoted, 46. 

Tryon, governor of North Caro- 
lina, 169. 

United States, assumes debts of die 
states, 9oa 

Valuation acts, in North Carolma, 
171 ; in New Hampshire, 272. 

Violation of public faith, 36, 71, 72, 
134. 13s. 14s. ^TJ^ i8o, 213. 255. 

Wampum, as currency, 7-9. 
Washington, G., on paper money, 

67, 68-69. 75. 
Webster, D., quoted, 8a 
Webster, P., quoted, 68, 7a 
Wentworth, B., governor of New 

Hampshire, 233 et passim. 
White, H., quoted, 73. 
Williamson, H., quoted, 82, 138- 

139. 150. 160, 197. 
Winthrop, J., quoted, 14. 
Witherspoon, J., quoted, 2, 67-68, 

Wynne, M., on currency of the 
Carolinas, 177. 


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