Early American currency went through several stages of development during the colonial and post-Revolutionary history of the United States.
John Hull was authorized by the
Massachusetts legislature to make the earliest coinage of the colony (the willow, the oak, and
the pine tree shilling
The pine tree shilling was a type of coin minted and circulated in the thirteen colonies.
The Massachusetts Bay Colony established a mint in Boston in 1652. John Hull was Treasurer and mintmaster; Hull's partner at the "Hull Mint" was Robert Sa ...
) in 1652.
Because few coins were minted in the
Thirteen Colonies
The Thirteen Colonies, also known as the Thirteen British Colonies, the Thirteen American Colonies, or later as the United Colonies, were a group of British colonies on the Atlantic coast of North America. Founded in the 17th and 18th centu ...
, which later became the
United Colonies
The "United Colonies" was the name used by the Second Continental Congress for the emerging nation comprising the Thirteen Colonies in 1775 and 1776, before and as independence was declared. Continental currency banknotes displayed the name 'T ...
and then the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
, foreign coins like the
Spanish dollar were widely circulated.
Colonial governments, at times, issued
paper money to facilitate
economic activities
Economics () is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyze ...
. The
British Parliament passed
Currency Act
The Currency Act or Paper Bills of Credit Act is one of several Acts of the Parliament of Great Britain that regulated paper money issued by the colonies of British America. The Acts sought to protect British merchants and creditors from being pa ...
s in 1751, 1764, and 1773 to regulate colonial paper money.
During the
American Revolution
The American Revolution was an ideological and political revolution that occurred in British America between 1765 and 1791. The Americans in the Thirteen Colonies formed independent states that defeated the British in the American Revoluti ...
, the Colonies became independent states. No longer subject to monetary regulations arbitrarily imposed by the
British Parliament, the States began to issue 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. To meet the monetary demands of the war, State and Continental governments printed large amounts of currency, leading to rapid
depreciation
In accountancy, depreciation is a term that refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wear, and second, the ...
. By the end of the war, these paper notes became effectively worthless. Additionally, British
counterfeiting gangs contributed further to the decreased value. By its conclusion, only a few counterfeiters had been caught and preemptively hanged, for the crime.
Colonial currency
There were three general types of
money
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money ar ...
in the Colonies of
British America: the
specie (coins), printed
paper money and trade-based
commodity money
Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods.
This is in contrast to representa ...
.
[Flynn,]
"Credit in the Colonial American Economy"
Commodity money was used when
cash
In economics, cash is money in the physical form of currency, such as banknotes and coins.
In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-im ...
(coins and paper money) were scarce.
Commodities such as
tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
,
beaver
Beavers are large, semiaquatic rodents in the genus ''Castor'' native to the temperate Northern Hemisphere. There are two extant species: the North American beaver (''Castor canadensis'') and the Eurasian beaver (''C. fiber''). Beavers a ...
skins, and
wampum, served as money at various times in many locations.
[Michener]
"Money in the American Colonies"
Cash in the Colonies was
denominated in pounds,
shillings, and
pence.
The value of each denomination 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
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and ...
.
The coins in circulation during the
Colonial Era were, most often, of
Spanish and
Portuguese origin.
For most of the 17th and 18th century, the Spanish dollar was one of the few widely accepted denominations by the people, which resulted in it serving as the colonists' interim currency. The prevalence of the
Spanish dollar throughout the Colonies, led to the money of the United States being denominated in dollars, rather than pounds.
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
The Province of Massachusetts Bay was a colony in British America which became one of the thirteen original states of the United States. It was chartered on October 7, 1691, by William III and Mary II, the joint monarchs of the kingdoms of ...
created "the first authorized paper money issued by any government in the
Western World
The Western world, also known as the West, primarily refers to the various nations and states in the regions of Europe, North America, and Oceania. ".
[Newman, 1990, p. 11.] This paper money was issued to pay for a military expedition during
King William's War
King William's War (also known as the Second Indian War, Father Baudoin's War, Castin's War, or the First Intercolonial War in French) was the North American theater of the Nine Years' War (1688–1697), also known as the War of the Grand Alli ...
. Other colonies followed the example of Massachusetts Bay by issuing their own paper currency in subsequent military conflicts.
However, as the colonies began printing their own money, location-based socio economic issues soon followed. Most of these concerns were rooted in each colony having different values of the dollar, which made any inter-colony transactions a confusing mess. By the time Parliament decided to prohibit the printing of paper money in the colonies, their hired counterfeiters were able to take advantage of the common people, widening the gaps between socioeconomic classes.
The paper bills issued by the colonies were known as "
bills of credit". Bills of credit could not be exchanged for a fixed amount of gold or silver coins upon demand, but were redeemable at a time specified in the future.
[Wright, p. 45.] 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
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...
resulted. This happened especially in
New England
New England is a region comprising six states in the Northeastern United States: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. It is bordered by the state of New York to the west and by the Canadian provinces ...
and the southern colonies, which, unlike the
Middle Colonies, were frequently at war.
Pennsylvania, however, was responsible in not issuing too much currency, offering an example of a successful government-managed monetary system. Pennsylvania's paper currency, secured by land, generally maintained its value against gold from 1723 until the Revolution broke out in 1775.
This
depreciation
In accountancy, depreciation is a term that refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wear, and second, the ...
of colonial currency was harmful to creditors in Great Britain when colonists paid their debts with money that had lost value. The
British Parliament passed several
Currency Act
The Currency Act or Paper Bills of Credit Act is one of several Acts of the Parliament of Great Britain that regulated paper money issued by the colonies of British America. The Acts sought to protect British merchants and creditors from being pa ...
s to regulate the paper money issued by the colonies. The
Act of 1751 restricted the issue of paper money in
New England
New England is a region comprising six states in the Northeastern United States: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. It is bordered by the state of New York to the west and by the Canadian provinces ...
. 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). In 1776, British economist
Adam Smith
Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——� ...
criticized colonial bills of credit in his most famous work, ''
The Wealth of Nations
''An Inquiry into the Nature and Causes of the Wealth of Nations'', generally referred to by its shortened title ''The Wealth of Nations'', is the '' magnum opus'' of the Scottish economist and moral philosopher Adam Smith. First published in ...
.''
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
The American Revolution was an ideological and political revolution that occurred in British America between 1765 and 1791. The Americans in the Thirteen Colonies formed independent states that defeated the British in the American Revoluti ...
. After much lobbying, Parliament amended the act in 1773, permitting the colonies to issue paper currency as legal tender for public debts. Shortly thereafter, some colonies once again began issuing paper money. When the
American Revolutionary War
The American Revolutionary War (April 19, 1775 – September 3, 1783), also known as the Revolutionary War or American War of Independence, was a major war of the American Revolution. Widely considered as the war that secured the independence of t ...
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
The Smithsonian Institution ( ), or simply the Smithsonian, is a group of museums and education and research centers, the largest such complex in the world, created by the U.S. government "for the increase and diffusion of knowledge". Found ...
. 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 of currency signers who were also known to have attended the 1765
Stamp Act Congress or signed the
United States Declaration of Independence
The United States Declaration of Independence, formally The unanimous Declaration of the thirteen States of America, is the pronouncement and founding document adopted by the Second Continental Congress meeting at Pennsylvania State House ( ...
,
Articles of Confederation, or the
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the natio ...
.
Continental currency
After the
American Revolutionary War
The American Revolutionary War (April 19, 1775 – September 3, 1783), also known as the Revolutionary War or American War of Independence, was a major war of the American Revolution. Widely considered as the war that secured the independence of t ...
began in 1775, the
Continental Congress began issuing paper money known as Continental currency, or Continentals. Continental currency was denominated in dollars from $ to , including many odd denominations in between. During the Revolution, Congress issued in Continental currency.
The Continental Currency dollar was valued relative to the states' currencies at the following rates:
* 5 shillings –
Georgia
* 6 shillings –
Connecticut
Connecticut () is the southernmost state in the New England region of the Northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, New York (state), New York to the west, and Long Island Sound to the ...
,
Massachusetts
Massachusetts (Massachusett: ''Muhsachuweesut Massachusett_writing_systems.html" ;"title="nowiki/> məhswatʃəwiːsət.html" ;"title="Massachusett writing systems">məhswatʃəwiːsət">Massachusett writing systems">məhswatʃəwiːsət'' En ...
,
New Hampshire
New Hampshire is a U.S. state, state in the New England region of the northeastern United States. It is bordered by Massachusetts to the south, Vermont to the west, Maine and the Gulf of Maine to the east, and the Canadian province of Quebec t ...
,
Rhode Island
Rhode Island (, like ''road'') is a U.S. state, state in the New England region of the Northeastern United States. It is the List of U.S. states by area, smallest U.S. state by area and the List of states and territories of the United States ...
,
Virginia
Virginia, officially the Commonwealth of Virginia, is a state in the Mid-Atlantic and Southeastern regions of the United States, between the Atlantic Coast and the Appalachian Mountains. The geography and climate of the Commonwealth are ...
* 7 shillings –
Delaware
Delaware ( ) is a state in the Mid-Atlantic region of the United States, bordering Maryland to its south and west; Pennsylvania to its north; and New Jersey and the Atlantic Ocean to its east. The state takes its name from the adjacent ...
,
Maryland
Maryland ( ) is a state in the Mid-Atlantic region of the United States. It shares borders with Virginia, West Virginia, and the District of Columbia to its south and west; Pennsylvania to its north; and Delaware and the Atlantic Ocean t ...
,
New Jersey
New Jersey is a state in the Mid-Atlantic and Northeastern regions of the United States. It is bordered on the north and east by the state of New York; on the east, southeast, and south by the Atlantic Ocean; on the west by the Delawa ...
,
Pennsylvania
Pennsylvania (; ( Pennsylvania Dutch: )), officially the Commonwealth of Pennsylvania, is a state spanning the Mid-Atlantic, Northeastern, Appalachian, and Great Lakes regions of the United States. It borders Delaware to its southeast, ...
* 8 shillings –
New York,
North Carolina
North Carolina () is a U.S. state, state in the Southeastern United States, Southeastern region of the United States. The state is the List of U.S. states and territories by area, 28th largest and List of states and territories of the United ...
* 32 shillings –
South Carolina
)''Animis opibusque parati'' ( for, , Latin, Prepared in mind and resources, links=no)
, anthem = " Carolina";" South Carolina On My Mind"
, Former = Province of South Carolina
, seat = Columbia
, LargestCity = Charleston
, LargestMetro = ...
Continental currency
depreciated badly during the war, giving rise to the famous phrase "not worth a continental". A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit. "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." Congress and the states lacked the will or the means to retire the bills from circulation through taxation or the sale of bonds.
Another problem was that the British successfully waged
economic warfare by
counterfeiting
To counterfeit means to imitate something authentic, with the intent to steal, destroy, or replace the original, for use in illegal transactions, or otherwise to deceive individuals into believing that the fake is of equal or greater value tha ...
Continentals on a large scale.
Benjamin Franklin
Benjamin Franklin ( April 17, 1790) was an American polymath who was active as a writer, scientist, inventor, statesman, diplomat, printer, publisher, and political philosopher. Encyclopædia Britannica, Wood, 2021 Among the leading int ...
later wrote:
By the end of 1778, Continentals retained from to of their face value. By 1780, the bills were worth 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.
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
Yearly Meeting is a term used by members of the Religious Society of Friends, or Quakers, to refer to an organization composed of constituent meetings or churches within a geographical area. The constituent meetings are called Monthly Meetings in ...
formally forbade its members to use the notes. In the 1790s, after the ratification of the United States Constitution, Continentals could be exchanged for
treasury bonds at 1% of face value.
After the collapse of Continental currency, Congress appointed
Robert Morris to be
Superintendent of Finance of the United States
Superintendent of Finance of the United States was the head of Department of Finance, which is an executive office during the Confederation period with power similar to a finance ministry. The only person to hold the office was Robert Morris, who ...
. 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
bullion coins 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 personal line of credit, which was further backed by a French loan of ,000 in silver coins.
The Bank of North America also issued notes convertible into gold or silver. 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.
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
The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the natio ...
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".
[U.S. Constitution, Article I, section 10.] However, in ''
Juilliard v. Greenman'' the Supreme Court of the United States settled an ongoing and very heated debate on whether this restriction of issuing bills of credit was also extended to the Federal government:
See also
*
Economic history of the United States
*
Federal Reserve Note
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 191 ...
*
History of economic thought
History (derived ) is the systematic study and the documentation of the human activity. The time period of event before the invention of writing systems is considered prehistory. "History" is an umbrella term comprising past events as well ...
*
History of the United States dollar
The history of the United States dollar began with moves by the Founding Fathers of the United States of America to establish a national currency based on the Spanish silver dollar, which had been in use in the North American colonies of the Uni ...
*
Monetary policy
Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for federal funds, very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money s ...
*
Money creation
Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region,Such as the Eurozone or ECCAS is increased. In most modern economies, money creation is controlled by the central bank ...
*
United States dollar
The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...
*
Hyperinflation
References
Footnotes
These references have been removed from EH.Net ---
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. .
*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. .
*Newman, Eric P. ''The Early Paper Money of America''. 5th edition. Iola, Wisconsin: Krause Publications, 2008. .
*Wright, Robert E. ''One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe''. New York: McGraw-Hill, 2008. .
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. .
*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. .
External links
Currency Issues to Overcome Depressions in Pennsylvania, 1723 and 1729Creating the U.S. Dollar Currency Union,1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?!--Please respect the wishes of this works author.Do not cite or quote.-->
{{Obsolete U.S. currency and coinage
Banknotes of the United States
Historical currencies of the United States
Financial history of the United States
fr:Effet colonial