II. THE PAPER CURRENCY CHAPTER IV 1775 TO 1811 THE history of the United States shows that the people have experimented with every known description of paper currency. The history of the colonial paper issues would form a bulky volume. period. Prior to 1775 every one of the colonies had at one The colonial time or another made use of note issues, generally under government authority, but in some cases emanating from private banking concerns. In most instances the issues were made to obviate raising revenue by taxation, but the volume was doubtless increased owing to the scarcity of coin, since notes of denominations as low as threepence, issued during that period, are still in existence. Massachusetts appears to have taken the lead in this as well as in many other matters, and as early as 1690 issued "bills of credit" to pay soldiers.1 No adequate provision for the redemption of the notes was made, and depreciation generally followed; and this proved equally true where the currency was given forced paying power. Some of the earlier forms merely certified that the bearer was entitled to receive so many dollars, some promised interest, but later the form "This bill Forced curshall pass current for - dollars" was quite generally adopted. When an issue had depreciated to such an extent as 1 Knox, United States Notes, I. rency. Continental currency. to be thoroughly discredited it would be redeemed at a percentage, and sometimes a very small percentage, of its par value, in a new issue put forth with solemn pledges for its redemption, which new issue underwent in turn a like depreciation. The losses suffered by New England on account of depreciated paper currency prior to the Revolution were much greater proportionately than the losses sustained by the other colonies. This section was more prolific in schemes with reference to currency. Gouge reports that in 1748 the quotation for £100 in coin ranged from £120 in Virginia paper to £1100 in that of New England. No definite record of the amounts of such currency is available, but that the values destroyed by depreciation were very great, considering the relative poverty of the colonies, is beyond doubt. All the bitter experiences which must have resulted were, however, apparently forgotten during the days of the Revolution. As early as May, 1775, the movement to emit bills of credit was begun. Both Massachusetts and New York communicated to the Continental Congress a desire for the issue of paper, the former colony advising that body of an authority given to its receivergeneral to borrow £100,000 "to support the forces," and asking Congress to assist in giving the notes "a currency through the continent."2 The communication from New York urged Congress to issue notes, rather than have separate issues by the colonies, but events moved too rapidly, for we find that New York itself issued $112,500 in that year.3 1 Gouge, Short History of Paper Money and Banking in the United States. 2 Journal, Continental Congress. 8 Schuckers, Finances of the Revolutionary War. The Continental Congress was powerless to impose taxes, and hence unable to make loans; consequently, burdened with the duty of prosecuting a war, no other recourse than note-issuing seemed possible. Accordingly, on June 22, 1775, but not without considerable opposition, a first issue of what was afterwards known as Continental Currency was authorized, in denominations from $1 to $8 and of $20, to the amount of $2,000,000.1 notes. The form adopted was simple. It read: "This bill Form of the entitles the bearer to receive Spanish milled dollars, or the value thereof in Gold or Silver, according to the resolution of the Congress, held at Philadelphia on the 10th day of May, A.D. 1775." The notes were numbered in ink and signed by two persons duly designated by Congress. While no terms of redemption were fixed, Congress pledged the faith of the colonies to such redemption. issues. A second issue of $1,000,000 was authorized in July, Further and at this time Congress apportioned the liability for the total issue to the several colonies in proportion to the estimated population.2 Under this act the redemption of the currency was to be provided for in four instalments, beginning in 1779. In November a further issue of $3,000,coo was voted. It will be observed that the currency bore no legal tender provision. The notes were generally received without objection for a time, but early in 1776 difficulties were encountered and a question arose as to the value of the coins in which the notes were payable. Congress thereupon adopted resolutions fixing the value of these coins. The following portions of the resolution show the status of the paper issues: "Whereas the holders of bills of credit emitted by authority of Congress will be entitled, at certain periods appointed for redemption thereof, to receive out of the treasury of the United Colonies the amount of the said bills in Spanish milled Redemption dollars, or the value thereof in gold or silver, and the value of such dollars, compared with other silver and gold coins, is estimated by different standards in different Colonies, whereby injustice may happen in some instances to the public, as well as to individuals, which ought to be remedied. of currency discussed. Drastic force laws contem plated. "And whereas the credit of the said bills as current money ought to be supported by the inhabitants of these Colonies, for whose benefit they were issued at the full value therein expressed, and who stand bound to redeem the same, according to the like value, and the pernicious artifices of the enemies of American liberty to impair the credit of the said bills by raising the nominal value of gold and silver ought to be guarded against and prevented, therefore . . 66 ... 'Resolved, That all bills of credit emitted by authority of Congress ought to pass current in all payments, trade and dealings in these Colonies, and be deemed equal in value to gold and silver, . . . and that whosoever shall offer, demand, or receive more in the said bills for any gold or silver coins, or bullion, than at the rates aforesaid, or more of the said bills for any lands, houses, goods, wares or merchandise than the nominal sums at which the same might be purchased of the same person with gold or silver, every such person ought to be deemed an enemy to the liberties of these Colonies, and treated accordingly, being duly convicted thereof before the committee of inspection of the city, county or district, or in case of an appeal from their decision, before the assembly convention council or committee of safety or before such other persons or courts as have or shall be authorized by the general assemblies or conventions of the Colonies respectively to hear and determine such offences."1 An earlier pronouncement contained this language: "... that any person who shall hereafter be so lost to all virtue and regard for his country as to refuse to receive said bills 1 Journal, Continental Congress. in payment, or obstruct and discourage the currency or circulation thereof, and shall be duly convicted . . . shall be deemed, published and treated as an enemy of his country, and precluded from all trade or intercourse with the inhabitants of those colonies." In 1776 Congress authorized the issue of $19,000,000, Further in 1777, $13,000,000 more, making the total so far expansion. $38,000,000. The states had issued in the same period about $10,000,000, so that the total volume was about $16 per capita.2 Accordingly, in the latter year depreciation began, and stringent legal tender laws were passed by all the states, in the vain hope of forcing the people to take these notes as the equivalent of coin. Congress recommended taxation by the states and attempted also to borrow money, but these efforts were fruitless. In 1778 further issues of $63,500,000 were made, and naturally further depreciation ensued. At the end of the year the ratio to coin was, as officially fixed by Congress, 100 to 131.3 Actually the depreciation was greater, the rating by Congress having been too favorable to the paper currency. In 1779 the issue Rapid depreexceeded $140,000,000, thus making a total of over $241,500,000 (although a limit of $200,000,000 had been resolved upon), to which must be added about $20,000,000 of local issues. Counterfeiting had become quite prevalent and accelerated depreciation so that at the end of 1779 the official rating to coin was about as 100 to 31.5 Congress stopped further emission, but some of the states (notably Virginia and North Carolina) increased their issues, redeeming some of the old issues 1 Journal, Continental Congress. 2 Schuckers, Finances of the Revolutionary War. 8 Phillips, Continental Paper Money. 4 Journal, Continental Congress. 5 Phillips, Continental Paper Money. ciation. |