Essays on the monetary history of the United States
Bullock, Charles Jesse, 1869-1941
"^fc^ lO CsJ i|fjip£||QJ||^ <{,\\y,Av ssss»» .^ .^^ (O CO 4 c2^ /^ ^ THE CITIZEN'S LIBRARY OF ECONOMICS, POLITICS, AND SOCIOLOGY EDITED BY RICHARD T. ELY, Ph.D., LL.D. DIRECTOR OF THE SCHOOL OF ECONOMICS, POLITICAL SCIENCE, AND HISTORY, UNIVERSITY OF WISCONSIN ESSAYS ON THE MONETARY HISTORY OF THE UNITED STATES THE CITIZEN'S LIBRARY OF ECONOMICS, POLITICS, AND SOCIOLOGY. i2mo. Half leather, j^i.25 net each. monopolies and trusts. By Richard T. Ely, Ph.D., LL.D. THE ECONOMICS OF DISTRIBUTION. Bv John A. Hobson. WORLD POLITICS. By Paul S. Reinsch, Ph.D., LL.B. ECONOMIC CRISES. By Edward D. Jones, Ph.D. OUTLINE OF ECONOMICS. By Richard T. Ely. GOVERNMENT IN SWITZERLAND. By John Martin Vincent, Ph.D. IN PREPARATION. ESSAYS IN THE MONETARY HISTORY OF THE UNITED STATES. By Charles J. Bullock, Ph.D. HISTORY OF POLITICAL PARTIES IN THE UNITED STATES. By Jesse Macy, LL.D. MUNICIPAL ENGINEERING AND SANITATION. By Mr. M. N. Baker. THE MACMILLAN COMPANY, 66 Fifth Avenue. CITIZEN'S LIBRARY ESSAYS ON The Monetary History of the United States BY CHARLES jr BULLOCK, Ph.D. .£.*■ Of* ASSISTANT PROFESSOR OF ECONOMICS IN WILLIAMS COLLEGE THE MACMILLAN COMPANY LONDON: MACMILLAN AND CO., Ltd. ^\A' 1900 %353A- All rights reserved Copyright, 1900, By the MACMILLAN COMPANY. J. S. Cushing & Co. — Berwick & Smith Norwood Mass. U.S.A. TO ^UQmim % 33udt PROFESSOR OF GREEK IN BOSTON UNIVERSITY THIS BOOK IS DEDICATED AS A MARK OF GRATITUDE AND AFFECTIONATE REMEMBRANCE BY HIS FORMER PUPIL THE AVTHOR Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/essaysonmonetaryOObulluoft \ PREFACE 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. CHARLES J. BULLOCK. WiLLIAMSTOWN, MASS., August, 1900. vu CONTENTS PART I THREE CENTURIES OF CHEAP MONEY IN THE UNITED STATES CHAPTER PAGB I. Introduction i II. Wampum and Barter Currency III. Silver and Gold Currencies IV. Colonial Paper Money V. Continental Paper Money. VI. State Banks of Issue. VII. A Return to Government Paper Money VIII. Gold and Silver 7 13 29 60 79' 94 no PART II THE PAPER CURRENCY OF NORTH CAROLINA 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 ix X CONTENTS PART III THE PAPER CURRENCY OF NE W HAMPSHIRE CHAPTER PAGB I. Colonial Issues (1709- 1739) • • • 207 II. Colonial Issues (i 740-1 774) . . . 232 III. Revolutionary Issues (i 775-1788) . . 260 Bibliography 275 Index 289 Part I THREE CENTURIES OF CHEAP MONEY IN THE UNITED STATES CHAPTER I INTRODUCTION 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 our 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 MONETARY HISTORY have remained sparsely peopled and devoted chiefly to agricultural pursuits have always fur- nished a favorable field for the old propaganda. 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 ^ 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 experience 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. 2 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. 2 INTRODUCTION 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 less progressive people ; but with us it has been a real and serious obstacle, which has been removed only by the slow growth 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 ^ 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 unavoidably swallowed up in procuring provisions, clothing, and utensils for husbandry and labor, to subdue and cultivate the soil." Recs. of R. I., V. 8. 3 MONETARY HISTORY. 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 inveist- 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 country. 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 4 INTRODUCTION 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, y efforts to secure a cheap medium of exchange. While it is not claimed that this thesis is entirely noveV 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 P'irst 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. 5 MONETARY HISTORY 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 expected. CHAPTER II WAMPUM AND BARTER CURRENCY 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 as 1 6 19, tobacco was made receivable at three 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 cheaper substitutes for metallic money. For the Indians, wampum had been a satisfac- tory currency .2 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 N. Y., I. 269, 365. 7 MONETARY HISTORY 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 increase 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. 8 WAMPUM AND BARTER CURRENCY 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 chestful 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, II5»434- 2 Scharf, I. 273, 278, 280, 282 ; II. 35-36 ; McMahon, 224-225, 283 ; Ripley, no, in, 131-132 ; Hist. Mag., II. 42-43. In Vir- ginia the burgesses frequently insisted upon having their own wages paid in coin. Ripley, 132. 9 MONETARY HISTORY 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, bacon, pork, beef, fish, flax, wool, sugar, brandy, 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 Dakota.^ The use of these forms of " country pay," or ** specie," as, singularly enough, it was sometimes 1 For the Carolinas, 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. 2 On these barter currencies, see Bronson, 5-13 ; Weeden, loi, 119, 128, 142, 170, 178, 196 ; Fernow, 298 ; Hist. Mag., II. 43-44 ; Bruce, II. 521 ; Douglass, Discourse, 315-317. * Roosevelt, III. i6o-i6i ; IV. 113-114, 232-233; Andrews, 119. 10 WAMPUM AND BARTER CURRENCY 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 Weeden, 97, 99, 115, 118, 132. 2 Thus a Springfield constable had to transport to Boston one hundred and thirty bushels 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. 8 Mass. Recs., IV. 348. * Felt, 38, 40, 45, 54 ; Douglas, Fin. Hist., 49-50. II MONETARY HISTORY well compete with puny cattle and bad grain as a medium for the settlement of public or private debts.i 1 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. 920. 12 CHAPTER III SILVER AND GOLD CURRENCIES 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 $17,579,000 between 1600 and 1620 ; and Spanish silver money had become common in all parts of the globe. For these statistics see Rep. Free. 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 13 MONETARY HISTORY 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 colonies. 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 greatly between 1700 and 1760, as is shown in the following table : — Years. Average Annual Product in Thousands of Marks. Brazil. All Other Countries. 1681-1700 4,185 25,849 1 701-1720 7,673 28,095 1 721-1740 24,692 28,535 1741-1760 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 : — Years. Average Annual Product in Thousands of Dollars. Gold. Silver. I581-1600 4,905 17,413 1681-1700 7,154 14,210 1 721-1740 12,681 17,924 1741-1760 16,356 22,162 1 Winthrop, N. Eng., I. 307. Cf. Bradford, 441. 14 SILVER AND GOLD CURRENCIES 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 Coyns, 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. 2 Bruce, II. 504, 506, 507; Ripley, 118, 119, 131. ' Gouge, 5. See also statement of William Fishbourne, in 1739. Watson, Annals, I. 75. * Chalmers, 12. ^Douglass, Discourse, 338. 15 MONETARY HISTORY met with popular approval.^ This is only a tithe of the evidence that might be presented upon this point. 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 " country 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. 2 " As the said Silver Coins went by Tale, and were not mill'd, 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. 1133-1135 ; Yale Rev., VII. 263, 409 ; Felt, 35, 59, 60 ; Bronson, 20-22 ; Fernow, 303-305. 8 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 Connecticut. Bronson, 22-23. C^- ^^^^ Rev., VII. 248, 259. 16 SILVER AND GOLD CURRENCIES 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 1816, 1718.7 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^. 6</., a valuation which it retained during the next eighty 1 Bronson, 21 ; Fernow, 303 ; Ya/e 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. 2 McCuUoch, 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 MONETARY HISTORY 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 4^. 6d.y the colonial pound remained the same as the pound sterling. But as early as 1642, Massachusetts raised the rating of the dollar to 5 J"., and Connecticut took similar action the following year.^ In 1645, Vir- ginia rated this coin at 6s. ^ but this valuation was lowered to 5^. 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 22^^ 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. 2 Mass. Recs., 11. 29; Yale Rev.^ VII. 247-248; Conn. Recs., I. 86. * Hening, Stat., I. 308, 397 ; Ripley, 112, 114. * On the New England mint, see Felt, 30-35 ; Hutchinson, Hist., I. 164-165 ; Watson, 2-6; Yale Rev., VII. 249 et seq.; Hickcox, Coinage, 1-13 ; Crosby. The New England shiUing had fine contents of 66.6 grains. Yale Rev., VII. 252. 5 In 1 67 1, Maryland rated the dollar at 6^. 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. 201 ; Yale 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. 18 SILVER AND GOLD CURRENCIES Virginia, after having advanced the dollar to 6s. in 1683, allowed it to pass at ^s. a few years later. South Carolina fixed a rate of 5^". for a light coin weighing 12 dwts., with an addition of '^^d. in value for every additional pennyweight. In New York, a dollar weighing 15 dwts. passed at 6j., while one weighing 17 dwts. was rated at 6s. ()d. 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 ^ For Virginia, see Ripley, 116-118; Bruce, II. 510-511. For South Carolina, Stat, of S. C, II. 178; Carroll, II. 258. The rating of 55. for a dollar weighing 12 dwts. would give a rate of 6s. t,\d. for a dollar weighing 17 dwts., allowing T,\d. for each addi- tional dwt. Cf. Stat, of S. C, IX. 779. For New York, Fernow, 301. For Pennsylvania, Shepherd, 402-404 ; Docs, of N. Y., IV. 1047, 1059, 1 1 34. For West Jersey, a law of 1693 rated a 17 dwt. coin at ']s. This was done in order that the coins might have the same rating that prevailed in Pennsylvania. See Leam. and Spicer, 517. It seems possible that the actual usage in W^est Jersey may have followed that of Pennsylvania in 1700. In Maryland there is a contemporary statement that the dollar was rated at 45. 6d. in 1697. See 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 6s. See Scharf, II. 35. 2 Chalmers, 10-15; Bruce, II. 509-510; Docs, of N. Y., IV. 1047, 1059 ; Fernow, 301 ; Ripley, 116 ; Smith, N. J., 240. 19 MONETARY HISTORY 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 dj/ 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. \o.6^d? But the colonies usu- ally * began to rate silver at js. or Sj*. per ounce, and soon placed it at even higher figures.^ Thus 1 Chalmers, 14-16, 414-415 ; Yale Rev., VII. 406-410 ; Doug- lass, Discourse, 301-302; Ashley, 50-63. ^ci^almers, 15. * See Sumner, in Yale Rev., VII. 407. The sterling value of silver was 5 j. 2d. per ounce. The law of 1 707 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 17 10 rated the ounce of silver at 6^^. -^d., which was even less than Parliament had allowed. Ripley, 127. But in 1727 silver was raised to ds. %d. Idem, 130. See Douglass, Discourse, 316. Here it continued, and was, therefore, always a little below the rate fixed by Parliament. 5 Belknap, III. 225 ; Yale Rev., VII. 407-412 ; Felt, 60 ; Weeden, 387 ; Conn. Recs., V. 157 ; Phillips, I. 19, 61, 106, III ; Fernow, 306 ; Douglass, Discourse, 311, 312. 20 SILVER AND GOLD CURRENCIES 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 6s., and silver was rated at 6s. Sd. 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 Ya/£ Rev,, VII. 412-413 ; Felt, 121, 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 6j., an ounce of silver would have been worth about bs. 10.65^. But, as a matter of fact, few, if any, dollars were of full weight, i.e. I7^dwts. gross contents. With silver at 6^. Zd. 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 silver. 2 Papers of N. H., IX. 66 ; Potter and Rider, 99 ; Bronson, 74 ; Ripley, 132-133 ; Writings of Jefferson, VII. 409. 21 MONETARY HISTORY 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 ^s.^ These valuations were retained until the state currencies were super- seded by a national system after 1789. The 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., was rated at 5^"., the colonial pound was reduced to 1^4.00, 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 1^3-33> or 1289 grains of pure metal, while ;£i33|^ of colonial currency equalled ^100 sterling. A rating of ys. 6d. for the piece of eight reduced the colonial pound to $2.66y or 103 1 grains of silver; 1 Stat, of S. C, IV. 543 ; Dip. Corr. of Rev., XII. 91. In South Carolina until 1783 the dollar was rated at 32^. 6d., 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., 1781, Chap. 16 ; Laws of Del., II. 731-732 ; Dip. Corr. of Rev., XII. 91. 'In 1738, silver was current in New York at 9^. 3^. per ounce. Douglass, Discourse, 312. Two years later it fell to about gs. Docs, of N. v., VI. 169. In 1756, Smith wrote that since the last war silver had been valued at about gs. 2d. Smith, N. Y., 333. This last rating of silver would make the dollar worth 85., and it remained thenceforth at that figure. See Hickcox, Bills of Credit, 50. For North Carohna see Williamson, II. 1 15 ; Dip. Corr. of Rev., XII. 91. * On this general subject, see Adler. 22 SILVER AND GOLD CURRENCIES and made £166^ of colonial currency equal to ;^*ioo sterling. Finally, when the dollar was valued at 8s., the colonial pound amounted to ;^2.50, or 967 grains of fine metal; while £177^-^ of colonial money was equivalent to ;£ioo ster- ling-^ 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. 2 Chalmers, 5, 7. 23 MONETARY HISTORY " 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 view. 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, 178; 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. 2 Chalmers, 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. 1 15; 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; Va/e Rev., VII. 257, 264; Fernow, 305; McMahon, 226; Bruce, II. 506. 24 SILVER AND GOLD CURRENCIES 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 i/cx) 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 7 14, 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 payments were mostly made in gold, New York and Britain gradually exhaust- ing our silver." Proud, II. i6i. 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 Yale Rev.y 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. 2 Stat, of S. C, II. 195, 178; Carroll, II. 258. *Hening, Stat., IV. 51, 52, 218, 219, XL 117, n8; Ripley, 127, 130. * YaU Rev., Nil. ^11. 25 MONETARY HISTORY 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 1 762 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 Yale 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. 