Early American currency

Obverse and reverse of a three pence note of paper currency issued by the Province of Pennsylvania and printed by Benjamin Franklin in 1764.

Early American currency went through several stages of development in colonial and post-Revolutionary history of the United States. Because few coins were minted in the thirteen colonies that became the United States in 1776, foreign coins like the Spanish dollar were widely circulated. Colonial governments sometimes issued paper money to facilitate economic activity. The British Parliament passed Currency Acts in 1751, 1764, and 1773 that regulated colonial paper money.

During the American Revolution, the colonies became independent states; freed from British monetary regulations, they issued paper money to pay for military expenses. The Continental Congress also issued paper money during the Revolution, known as Continental currency, to fund the war effort. Both state and Continental currency depreciated rapidly, becoming practically worthless by the end of the war. This depreciation was caused by the government having to over-print in order to meet the demands of war. This negative aspect of the financial system should not be seen as a negative reflection on the financial system.

Colonial currency

There were three general types of money in the colonies of British America: specie (coins), paper money and commodity money.^[1] Commodity money was used when cash (coins and paper money) was scarce. Commodities such as tobacco, beaver skins, and wampum served as money at various times and places.^[2]

As in Great Britain, cash in the colonies was denominated in pounds, shillings, and pence.^[2] The value varied from colony to colony; a Massachusetts pound, for example, was not equivalent to a Pennsylvania pound. All colonial pounds were of less value than the British pound sterling.^[2] The coins in circulation in the colonies were most often of Spanish and Portuguese origin.^[2] The prevalence of the Spanish dollar in the colonies led to the money of the United States being denominated in dollars rather than pounds.^[2]

One by one, colonies began to issue their own paper money to serve as a convenient medium of exchange. In 1690, the Province of Massachusetts Bay created "the first authorized paper money issued by any government in the Western World."^[3] This paper money was issued to pay for a military expedition during King William's War. Other colonies followed the example of Massachusetts Bay by issuing their own paper currency in subsequent military conflicts.^[3]

The paper bills issued by the colonies were known as "bills of credit." Bills of credit were usually fiat money: they could not be exchanged for a fixed amount of gold or silver coins upon demand.^[2][4] Bills of credit were usually issued by colonial governments to pay debts. The governments would then retire the currency by accepting the bills for payment of taxes. When colonial governments issued too many bills of credit or failed to tax them out of circulation, inflation resulted. This happened especially in New England and the southern colonies, which, unlike the Middle Colonies, were frequently at war.^[4] Pennsylvania, however, was responsible in not issuing too much currency and it remains a prime example in history as a successful government-managed monetary system. Pennsylvania's paper currency, secured by land, was said to have generally maintained its value against gold from 1723 until the Revolution broke out in 1775.

This depreciation of colonial currency was harmful to creditors in Great Britain when colonists paid their debts with money that had lost value. In 1776, British (Scot) economist Adam Smith criticized colonial bills of credit in his most famous work, The Wealth of Nations. The inflationary nature of the currency, wrote Smith, was a "violent injustice" to the creditor; "a scheme of fraudulent debtors to cheat their creditors" (Book II, Chapter II). As a result, the British Parliament passed several Currency Acts to regulate the paper money issued by the colonies. The Currency Act of 1751 restricted the emission of paper money in New England. It allowed the existing bills to be used as legal tender for public debts (i.e. paying taxes), but disallowed their use for private debts (e.g. for paying merchants).^[5]

Another Currency Act, in 1764, extended the restrictions to the colonies south of New England. Unlike the earlier act, this act did not prohibit the colonies in question from issuing paper money but it forbade them to designate their currency as legal tender for public or private debts. That prohibition created tension between the colonies and the mother country and has sometimes been seen as a contributing factor in the coming of the American Revolution. After much lobbying, Parliament amended the act in 1773, permitting the colonies to issue paper currency as legal tender for public debts.^[6] Shortly thereafter, some colonies once again began issuing paper money. When the American Revolutionary War began in 1775, all of the rebel colonies, soon to be independent states, issued paper money to pay for military expenses.

Thirteen colony set of United States Colonial currency

The Thirteen Colony set of colonial currency below is from the National Numismatic Collection at the Smithsonian Institution. Examples were selected based on the notability of the signers, followed by issue date and condition. The initial selection criteria for notability was drawn from a list^[7] of currency signers who were also known to have signed the United States Declaration of Independence, Articles of Confederation, the United States Constitution, or attended the Stamp Act Congress.^{[nb 1]}

Complete 13-colony set of United States Colonial currency^{[8][nb 2]}

Colony	Value	Date	Issue	First[nb 3]	Note (Obv)	Note (Rev)	Signatures
					Connecticut	40s		1775-01-02	£15,000[9]	1709[10]			Elisha Williams, Thomas Seymour, Benjamin Payne[nb 4]
Delaware	4s	1776-01-01	£30,000[12]	1723[13]			John McKinly, Thomas Collins, Boaz Manlove
Georgia	$40	1778-05-04	£150,000[nb 5]	1735[15]			Charles Kent, William Few, Thomas Netherclift, William O’Bryen,[nb 6] Nehemiah Wade
Maryland	$1	1770-03-01	$318,000[18]	1733[19]			John Clapham, Robert Couden[nb 7]
Massachusetts	2s	1741-05-01	£50,000[21]	1690[22]			Robert Choate, Jonathan Hale, John Brown, Edward Eveleth
New Hampshire	$1	1780-04-29	$145,000[23]	1709[10]			James McClure, Ephraim Robinson, Joseph Pearson,[nb 8] John Taylor Gilman (rev)
New Jersey	12s	1776-03-25	£100,000[25]	1709[26]			Robert Smith, John Hart, John Stevens, Jr.
New York	2s	1775-08-02	£2,500[27]	1709[28]			John H. Cruger, William Waddell[nb 9]
North Carolina	£3	1729-11-27	£40,000[30]	1712[31]			William Downing,[nb 10] John Lovick,[nb 11] Edward Moseley, Cullen Pollock,[nb 12] Thomas Swann[nb 13]
Pennsylvania	20s	1771-03-20	£15,000[35]	1723[36]			Francis Hopkinson, Robert Strettell Jones, William Fisher[nb 14]
Rhode Island	$1	1780-07-02	£39,000[38]	1710[39]			Caleb Harris, Metcalf Bowler,[nb 15] Jonathan Arnold
South Carolina	$60	1779-02-08	$1,000,000[41]	1703[42]			John Scott, John Smyth, Plowden Weston[nb 16]
Virginia	£3	1773-03-04	£36,384[44]	1755[45]			Peyton Randolph, John Blair, Jr., Robert Carter Nicholas, Sr.(rev)

Continental currency

Continental One Third Dollar Note (obverse)

A fifty-five dollar Continental issued in 1779.

After the American Revolutionary War began in 1775, the Continental Congress began issuing paper money known as Continental currency, or Continentals. Continental currency was denominated in dollars from $¹⁄₆ to $80, including many odd denominations in between. During the Revolution, Congress issued $241,552,780 in Continental currency.^[46]

Continental currency depreciated badly during the war, giving rise to the famous phrase "not worth a continental".^[47] A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit.^[48] "Some think that the rebel bills depreciated because people lost confidence in them or because they were not backed by tangible assets," writes financial historian Robert E. Wright. "Not so. There were simply too many of them."^[49] Congress and the states lacked the will or the means to retire the bills from circulation through taxation or the sale of bonds.^[50]

Another problem was that the British successfully waged economic warfare by counterfeiting Continentals on a large scale. Benjamin Franklin later wrote:

The artists they employed performed so well that immense quantities of these counterfeits which issued from the British government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass.^[51]

By the end of 1778, Continentals retained from ¹⁄₅ to ¹⁄₇ of their face value. By 1780, the bills were worth ¹⁄₄₀ of their face value. Congress attempted to reform the currency by removing the old bills from circulation and issuing new ones, without success. By May 1781, Continentals had become so worthless that they ceased to circulate as money. Franklin noted that the depreciation of the currency had, in effect, acted as a tax to pay for the war.^[52]

For this reason, some Quakers, whose pacifism did not permit them to pay war taxes, also refused to use Continentals, and at least one Yearly Meeting formally forbade its members to use the notes.^[53] In the 1790s, after the ratification of the United States Constitution, Continentals could be exchanged for treasury bonds at 1% of face value.^[54]

After the collapse of Continental currency, Congress appointed Robert Morris to be Superintendent of Finance of the United States. Morris advocated the creation of the first financial institution chartered by the United States, the Bank of North America, in 1782. The bank was funded in part by specie loaned to the United States by France. Morris helped finance the final stages of the war by issuing notes in his name, backed by his own money. The Bank of North America also issued notes convertible into specie.^[55] Morris also presided over the creation of the first Mint operated by the U.S. Government, which struck the first coins of the United States, the Nova Constellatio patterns of 1783.^[56]

The painful experience of the runaway inflation and collapse of the Continental dollar prompted the delegates to the Constitutional Convention to include the gold and silver clause into the United States Constitution so that the individual states could not issue bills of credit or "make any Thing but gold and silver Coin a Tender in Payment of Debts."^[57] This restriction of bills of credit was extended to the Federal government, as the power to "emit bills" from the Articles of Confederation was abolished, leaving Congress with the power "to borrow money on credit.".^[58][59]

See also

• Economic history of the United States
• Federal Reserve Note
• History of economic thought
• History of the United States dollar
• Monetary policy
• Money creation
• United States dollar
• Hyperinflation

References

Footnotes

1. Visually attractive and early examples were digitized and additional signer research was conducted later.
2. Obverse and reverse images have been prepared separately for table preparation purposes. Some of the notes obverse/reverse are not on the same orientation which would make single images containing both distracting.
3. Date of the first issue of paper currency for each of the Colonies.
4. Williams, Seymour, and Payne (among others) were appointed to a committee to print and sign currency for the Colony of Connecticut in the amount of 50,000 pounds.^[11]
5. Newman (2008) indicates the total issue in Pound sterling despite the currency issue in dollars.^[14]
6. O’Bryen, Treasurer of Georgia^[16] was elected to the Continental Congress but did not attend.^[17]
7. Couden served as Mayor of Annapolis from 1785–86 and 1790–91.^[20]
8. Act authorizing Ephraim Robinson and Joseph Pearson to countersign New Hampshire currency.^[24]
9. Waddell was a New York City Alderman (1773–77) with the authority to sign currency issued to fund the “water works” under construction near Broadway and Chambers streets.^[29]
10. Downing served as Speaker of the House of Burgesses from 1735 to 1739.^[32]
11. Lovick was a member of the House of Burgesses.^[33]
12. Pollock was a member of the House of Burgesses.^[34]
13. Swann served as Speaker of the House of Burgesses in 1729.^[32]
14. Hopkinson, Jones, and Fisher authorized to sign Pennsylvania currency.^[37]
15. Act passed June 1780 authorizing Harris and Bowler to sign Rhode Island currency.^[40]
16. Scott, Smyth, and Weston (among others) were appointed commissioners with the authority to print and sign one million dollars of South Carolina currency.^[43]

These references have been removed from EH.Net ---

1. Flynn, "Credit in the Colonial American Economy".
2. Michener, "Money in the American Colonies".
3. Newman, 1990, p. 11.
4. Wright, p. 45.
5. Allen, pp. 96–98.
6. Allen, p. 98.
7. Newman, 2008, pp. 24–25.
8. Friedberg & Friedberg, pp. 12–29.
9. Newman, 2008, p. 110.
10. Newman, 2008, p. 89.
11. Public Records, May, 1775, The public records of the Colony of Connecticut 1636–1776, retrieved 29 April 2014
12. Newman, 2008, p. 125.
13. Newman, 2008, p. 119.
14. Newman, 2008, p. 151.
15. Newman, 2008, p. 130.
16. Journals of the Continental Congress, 1774–1789, Volume 11, Government Printing Office, retrieved 29 April 2014
17. Biographical Directory of the United States Congress, 1774–2005, Government Printing Office, retrieved 29 April 2014
18. Newman, 2008, p. 172.
19. Newman, 2008, p. 167.
20. Robert Couden, Maryland State Archives, retrieved 29 April 2014
21. Newman, 2008, p. 200.
22. Newman, 2008, p. 183.
23. Newman, 2008, p. 223.
24. An Act describing the tenor of notes and certificates to be issued by the Treasurer of this state and appointing a committee to counter sign said notes, Laws of New Hampshire: First constitutional period, 1784–1792, retrieved 29 April 2014
25. Newman, 2008, p. 260.
26. Newman, 2008, p. 247.
27. Newman, 2008, p. 285.
28. Newman, 2008, p. 269.
29. Colonial And Revolutionary Families Of Pennsylvania, Laws of New Hampshire: First constitutional period, 1784–1792, retrieved 29 April 2014
30. Newman, 2008, p. 315.
31. Newman, 2008, p. 313.
32. North Carolina State House of Representatives - Past Speakers of the House, Colonial and State Records of North Carolina, retrieved 29 April 2014
33. Letter from George Burrington to the Board of Trade of Great Britain, Documenting the American South, retrieved 29 April 2014
34. Minutes of the Upper House of the North Carolina General Assembly, Documenting the American South, retrieved 29 April 2014
35. Newman, 2008, p. 346.
36. Newman, 2008, p. 331.
37. The Statutes at Large of Pennsylvania from 1682 to 1801, Volume 8, State Printer of Pennsylvania, retrieved 29 April 2014
38. Newman, 2008, p. 399.
39. Newman, 2008, p. 371.
40. Records of the Colony of Rhode Island and Providence Plantations, in New England, Alfred Anthony, Printer to the State, retrieved 29 April 2014
41. Newman, 2008, p. 426.
42. Newman, 2008, p. 405.
43. An ordinance for the printing, stamping and issuing one million dollars…, Statutes at Large of South Carolina: Acts, 1753 – 1786, retrieved 29 April 2014
44. Newman, 2008, p. 443.
45. Newman, 2008, p. 437.
46. Newman, 1990, p. 16.
47. Newman, 1990, p. 17.
48. Wright, p. 50.
49. Wright, p. 49.
50. Wright, 52
51. Kenneth Scot, Counterfeiting in Colonial America (Philadelphia: University of Pennsylvania Press, 2000), 259–60.
52. Wright, p. 49; Newman, 1990, 17.
53. Gross, David M. (2014). 99 Tactics of Successful Tax Resistance Campaigns. Picket Line Press. p. 166. ISBN 978-1490572741.
54. Newman, 1990, p. 17; Wright, p. 49.
55. Wright, p. 62.
56. Morris Papers, Volume 7, pp. 761–765
57. U.S. Constitution, Article I, section 10.
58. U.S. Constitution, Article I, section 8.
59. Rozeff, p 18. https://mises.org/books/rozeff_us_constitution_and_money.pdf

Flynn, David. "Credit in the Colonial American Economy". EH.Net Encyclopedia, edited by Robert Whaples. March 16, 2008. Michener, Ron. "Money in the American Colonies". EH.Net Encyclopedia, edited by Robert Whaples. June 8, 2003.

Bibliography

• Allen, Larry. The Encyclopedia of Money. 2nd edition. Santa Barbara, Calif: ABC-CLIO, 2009. ISBN 978-1-59884-251-7.
• Flynn, David. "Credit in the Colonial American Economy". EH.Net Encyclopedia, edited by Robert Whaples. March 16, 2008.
• Michener, Ron. "Money in the American Colonies". EH.Net Encyclopedia, edited by Robert Whaples. June 8, 2003.
• Newman, Eric P. The Early Paper Money of America. 3rd edition. Iola, Wisconsin: Krause Publications, 1990. ISBN 0-87341-120-X.
• Newman, Eric P. The Early Paper Money of America. 5th edition. Iola, Wisconsin: Krause Publications, 2008. ISBN 0-89689-326-X.
• Wright, Robert E. One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe. New York: McGraw-Hill, 2008. ISBN 978-0-07-154393-4.

Further reading

• Brock, Leslie V. The currency of the American colonies, 1700–1764: a study in colonial finance and imperial relations. Dissertations in American economic history. New York: Arno Press, 1975. ISBN 0-405-07257-0.
• Ernst, Joseph Albert. Money and politics in America, 1755–1775: a study in the Currency act of 1764 and the political economy of revolution. Chapel Hill: University of North Carolina Press, 1973. ISBN 0-8078-1217-X.

External links

• The Leslie Brock Center for the Study of Colonial Currency
• Currency Issues to Overcome Depressions in Pennsylvania, 1723 and 1729
• Creating the U.S. Dollar Currency Union,1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?