The monetary arrangements in use in America before the Revolution were extremely varied. Each colony had its own conventions, tender laws, and coin ratings, and each issued its own paper money. The monetary system within each colony evolved over time, sometimes dramatically, as when Massachusetts abolished the use of paper money within her borders in and returned to a specie standard.

Any encyclopedia-length overview of the subject will, unavoidably, need to generalize, and few generalizations about the colonial monetary system are immune to criticism because counterexamples can usually be found somewhere in the historical record. Those readers who find their interest piqued by this article would be well advised to continue their study of the subject by consulting the more detailed discussions available in Brock,Ernstand McCusker In the colonial era the unit of account and the medium of exchange were distinct in ways that now seem strange.

An example from modern times suggests how the ancient system worked. Nowadays race horses are auctioned in England using guineas as the unit of account, although the guinea coin has long since disappeared. It is understood by all who participate in these auctions that payment is made according to the rule that one guinea equals 21s. Guineas are the unit of account, but the medium of exchange accepted in payment is something else entirely. The unit of account and medium of exchange were similarly disconnected in colonial times Adler, The same piece of eight, on the eve of the Revolution, would have been treated as 6 s.

Colonists assigned local currency values to foreign specie coins circulating there in these pounds, shillings and pence. The same foreign specie coins most notably the Spanish dollar continued to be legal tender in the United States in the first half of the nineteenth century as well as a considerable portion of the circulating specie Andrews,pp.

Because the decimal divisions of the dollar so familiar to us today were a newfangled innovation in the early Republic and because the same coins continued to circulate the traditional units of account were only gradually abandoned. For several years, however, aged persons inquiring the price of an article in West Jersey or Philadelphia, required to told the value in shillings and pence, they not being able to keep in mind the newly-created cents or their relative value. So lately as some traders and tavern keepers in East Jersey kept their accounts in [New] York currency.

The dollar, under its new stamp, has preserved its name and circulation. The cent has become tolerably familiarized to the tongue, wherever it has been made by circulation familiar to the hand. But the dime having been seldom, and the mille never presented in their material images to the people, have remained.

Even now, at the end of thirty years, ask a tradesman, or shopkeeper, in any of our cities, what is a dime or mille, and the chances are four in five that he will not understand your question. But go to New York and offer in payment the Spanish coin, the unit of the Spanish piece of eight [one reale], and the shop or market-man will take it for a shilling. Carry it to Boston or Richmond, and you shall be told it is not a shilling, but nine pence. Bring it to Philadelphia, Baltimore, or the City of Washington, and you shall find it recognized for an eleven-penny bit; and if you ask how that can be, you shall learn that, the dollar being of ninety-pence, the eight part of it is nearer to eleven than to any other number.

It took many more decades for the colonial unit of account to disappear completely. Not only were the unit of account and medium of exchange disconnected in an unfamiliar manner, but terms such as money and currency did not mean precisely the same thing in colonial times that they do today. Every thing at the Market-Rate may be called a Currency ; more especially that most general Commodity, for which Contracts are usually made. The debt would be extinguished when the buyer paid the seller either in the local medium of exchange or in equally valued goods or services acceptable to the seller.

The debt might be paid at one remove, by the buyer fixing fences on land owned by someone to whom the seller was himself indebted.

Accounts would then be settled among the individuals involved. Baxter examined the accounts of John Hancock and his father Thomas Hancock, both prominent Boston merchants, whose business dealings naturally involved an atypically large amount of cash. Even these gentlemen managed most of their transactions in such a way that no cash ever changed hands Baxter, ; Plummer, ; Soltow,pp.

An astonishing array of goods and services therefore served by mutual consent at some time or other to extinguish debt. At certain times and in certain colonies, however, specific commodities came to be so widely used in transactions that they might appropriately be termed money. Specie, of course, was such a commodity, but its worldwide acceptance as money made it special, so it is convenient to set it aside for a moment and focus on the others.

At various times and places in the colonies such items as tobacco, rice, sugar, beaver skins, wampum, and country pay all served as money. These items were generally accorded a special monetary status by various acts of colonial legislatures. Whether the legislative fiat was essential in monetizing these commodities or whether it simply acknowledged the existing state of affairs is open to question.

Sugar was used in the British Caribbean, tobacco was used in the Chesapeake, and rice in South Carolina, each being the central product of their respective plantation economies. Wampum signifies the stringed shells used by the Indians as money before the arrival of European settlers. Wampum and beaver skins were commonly used as money in the northern colonies in the early stages of settlement when the fur trade and Indian trade were still mainstays of the local economy Nettels,; Fernow, ; Massey, ; Brock,pp.

Country pay is more complicated. Where it was used, country pay consisted of a hodgepodge of locally produced agricultural commodities that had been monetized by the colonial legislature. A list of commodities, such as Indian corn, beef, pork, etc. Sometimes country pay was only a legal tender in payment of obligations to the colonial or town governments.

Even where country pay was a legal tender only in payment of taxes it was often used in private transactions and even served as a unit of account.

Probate inventories from colonial Connecticut, where country pay was widely used, are generally denominated in country pay Main and Main, There were predictable difficulties where commodity money was used. The legislature sometimes overvalued agricultural commodities in setting their nominal prices. An unwary trader could easily be cheated. Set in late seventeenth-century Maryland, the poem is a first-person account of the tribulations and humiliations a newly-arrived Briton suffers while seeking to enter the tobacco trade.

The Briton agrees with a Quaker merchant to exchange his trade goods for ten thousand weight of oronoco tobacco in cask and ready to ship. When the Quaker fails to deliver any tobacco, the aggrieved factor sues him at the Annapolis court, only to discover that his attorney is a quack who divides his time between pretending to be a lawyer and pretending to be a doctor and that the judges have to be called away from their Punch and Rum at the tavern to hear his case.

In Pipe staves, Corn, or Flesh of Boar, Rare Cargo for the English Shoar. Thus ruined the poor factor sails away never to return. By the middle of the eighteenth century commodity money had essentially disappeared in northern port cities, but still lingered in the hinterlands and plantation colonies. North Carolina was an extreme case.

Country pay there continued as a legal tender even in private debts. The system was amended in and to require rated commodities to be delivered to government warehouses and be judged of acceptable quality at which point warehouse certificates were issued to the value of the goods at mandated, not market prices: Cash came in two forms: The most common method was for the colony to issue bills to pay its debts.

Bills of credit were originally designed as a kind of tax-anticipation scrip, similar to that used by many localities in the United States during the Great Depression Harper, Therefore when bills of credit were issued to pay for current expenditures a colony would ordinarily levy taxes over the next several years sufficient to call the bills in so they might be destroyed.

Sometimes even the bills of credit issued in a colony were not denominated in the local unit of account. In Maryland redeemed its Maryland-pound-denominated bills of credit and in issued new dollar-denominated bills of credit. Nonetheless Maryland pounds, not dollars, remained the predominant unit of account in Maryland up to the Revolution Michener and Wright, a, p.

The most striking example occurred in New England. The old tenor bills of all four colonies passed interchangeably and at par with one another throughout New England. Each new tenor bill was reckoned at three times its face value in old tenor terms.

These bills, like the old ones, circulated across colony borders throughout New England. As if this were not complicated enough, New Hampshire, Rhode Island, and Connecticut all created new tenor emission of their own, and the factors used to convert these new tenor bills into old tenor terms varied across colonies Davis, ; Brock, ; McCusker, pp.

Throughout New England, however, Old Tenor remained the unit of account. This occurred despite the fact that by only an inconsiderable portion of the bills of credit in circulation were denominated in old tenor. For the most part, bills of credit were fiat money. It was not uncommon for the bills to be inscribed with an explicit statement that the bill was worth a certain sum in silver. Michener and Wright, c, p.

Maryland had levied a tax and invested the proceeds of the tax in London. Its first emission was put into circulation in a novel fashion. This was recognized even by contemporaries. InMassachusetts was the first colony to issue bills of credit Felt,pp. Over time, the rest of the colonies followed suit. The last holdout was Virginia, which issued its first bills of credit in to defray expenses associated with its entry into the French and Indian War Brock,chapter 9.

The common denominator here is wartime finance, and it is worthwhile to recognize that the vast majority of the bills of credit issued in the colonies were issued during wartime to pay for pressing military expenditures. Peacetime issues did occur and are in some respects quite interesting as they seem to have been motivated in part by a desire to stimulate the economy Lester, However, peacetime emissions are dwarfed by those that occurred in war. The following graph, however, illustrates the fundamental importance of war finance; the dramatic spike marks the French and Indian War Brock,Tables 4, 6.

That bills in circulation peaked in reflects the fact that Quebec fell in and Montreal inso that the land war in North America was effectively over by Because bills were disproportionally emitted for wartime finance it is not surprising that the colonies whose currencies depreciated due to over-issue were those who shared a border with a hostile neighbor — the New England colonies bordering French Canada and the Carolinas bordering Spanish Florida.

It is important not to confuse the bills of credit issued by a colony with the bills of credit circulating in that colony. In the early s, Pennsylvania money was the primary medium of exchange in Maryland Maryland GazetteSeptember 15, ; Hazard,Eighth Series, vol. Where the currencies of neighboring colonies were of equal value, as was the case in New England between andbills of credit of neighboring colonies could be credited and debited in book accounts at face value.

When this was not the case, as when Pennsylvania, Connecticut, or New Jersey bills of credit were used to pay a debt in New York, an adjustment had to be made to convert these sums to New York money. The conversion was usually based on the par values assigned to Spanish dollars by each colony.

Indeed, this was also how merchants generally handled intercolonial exchange transactions McCusker,p. For example, on the eve of the Revolution a Spanish dollar was rated at 7 s. The ratio of eight to seven and a half being equal to 1. Connecticut rated the Spanish dollar at 6 s. Specie coins were the other kind of cash that commonly circulated in the colonies. Few specie coins were minted in the colonies. This was the only mint of any size or duration in the colonies, although minting of small copper coins and tokens did occur at a number of locations Jordan, ; Mossman, Colonial coinage is interesting numismatically, but economically it was too slight to be of consequence.

Most circulating specie was minted abroad. The gold and silver coins circulating in the colonies were generally of Spanish or Portuguese origin.

The Johanneses were gold coins, 8 escudos 12, reis in denomination; their name derived from the obverse of the coin, which bore the bust of Johannes V. The moidore was another Portuguese gold coin, 4, reis in denomination. That these coins were being used as a medium of exchange in the colonies is not so peculiar as it might appear. Raphael Solomonp. The Spanish pistole was the Spanish gold coin most often encountered in America.

While these coins were the most common, many others also circulated there Solomon, ; McCusker,pp. Alongside the well-known gold and silver coins were various copper coins, most notably the English half-pence, that served as small change in the colonies. Fractional parts of the Spanish dollar and the pistareen, a small silver coin of base alloy, were also commonly used as change.

None of these foreign specie coins were denominated in local currency units, however. Because foreign specie coins were in circulation long before any of the colonies issued paper money setting a rating on these coins amounted to picking a numeraire for the economy; that is, it defined what one meant by a pound of local currency. The ratings attached to individual coins were not haphazard: They were designed to reflect the relative weight and purity of the bullion in each coin as well as the ratio of gold to silver prices prevailing in the wider world.

In the early years of colonization these coin values were set by the colonial assemblies Nettels,chap. In Pennsylvania passed an act raising the rated value of its coins, causing the Governor of Maryland to complain to the Board of Trade of the difficulties this created in Maryland. Other current foreign silver coins were rated proportionately and similarly prohibited from circulating at a higher value. The Privy Council, however, had incautiously approved a Massachusetts act passed in rating Spanish dollars at 6 s.

This induced the Board of Trade to adopt the rating of the Massachusetts act. Had the proclamation been put into operation its effects would have been extremely deflationary because in most colonies coins were already passing at higher rates. When the proclamation reached America only Barbados attempted to enforce it. A chorus of such responses led the Board of Trade to take the matter to Parliament in hopes of enforcing a uniform compliance throughout America House of Lords,pp.

In the colonies it was largely ignored, and business continued to be conducted just as if the act had never been passed. Pennsylvania, it was true, went though a show of complying but even that lapsed after a while Brock,chapter 4. What the act did do, however, was push the process of coin rating into the shadows because it was no longer possible to address it in an open way by legislative enactment. Laws that passed through colonial legislatures certain charter and proprietary colonies excepted were routinely reviewed by the Privy Council, and if found to be inconsistent with British law, were declared null and void.

Two avenues remained open to alter coin ratings — private agreements among merchants that would not be subject to review in London, and a legislative enactment so stealthy as to slip through review unnoticed. New York was the first to succeed using stealth. Since 15 years previously New York had rated the Lyon dollar at 5 s. When the Board of Trade finally realized what New York was up to it was too late: These colony laws were still thought to be in force in the late colonial period.

These private agreements effectively nullified not only the act of Parliament but also local statutes, such as those rating silver in New York at 8 s. Records of many such agreements have survived. These agreements, when backed by a strong consensus among merchants, seem to have been effective. Decades later, Benjamin Franklinvol. After the New York Chamber of Commerce was founded inmerchant deliberations on these agreements were recorded. When the New York Chamber of Commerce resolved to change the rating of coins and the minimum allowable weight for guineas the almanac values changed immediately to reflect those adopted by the Chamber Stevens,pp.

The coin rating table above, reproduced from The New-York Pocket Almanack for the Year shows how coin-rating worked in practice in the late colonial period. Note the reference to the deliberations of the Chamber of Commerce. The colonists possessed no central bank and colonial treasurers, however willing they might have been to exchange paper for specie, sometimes found themselves without the means to do so.

This had a benign and equitable, a persuasive, a satisfactory, and an extensive influence. If any one doubted the validity or price of his bill, his neighbor immediately removed his doubts by exchanging it without loss into gold or silver. So high was the opinion of the people raised, that often an advance was given for paper on account of the convenience of carriage.

In the market as well as in the payment of debts, the paper and the coin possessed a voluntary, equal, and concurrent circulation, and no special contract was made which should be paid or whether they should be received at a difference.

By this instant realization and immediate exchange, the government had all the gold and silver in the community as effectually in their hands as if those precious metals had all been locked up in their treasury. By this realization and exchange they could extend credit to any degree forex empire natural gas was required.

The people could not be induced to entertain a doubt of their paper, because the government had never failed them in a single instance, either in war or in peace New Jersey GazetteJanuary 30, Insofar as colonial bills of credit were convertible on demand into specie at the simple technical trading rules and stochastic properties of stock returns specie value of coins, there is no mystery as to why those bills of credit maintained their value.

How merchants maintained and enforced such accords, however, is relatively inscrutable. Some economists are incredulous that private associations of merchants could accomplish the feat.

This leaves private debt instruments, such as bank notes, bills of exchange, notes of hand, and shop notes. It is sometimes asserted that there were no banks in colonial America, but this is something of an overstatement. There were several experiments made and several embryonic march 2000 stock market crash banks actually got notes into circulation.

Andrew McFarland Davis devoted an entire volume to banking in colonial New England Davis,vol. Perhaps the most elliott wave indicator mt4 free download bank 2 hour binary option no deposit required the era was established in South Carolina in Bills of exchange were similar to checks.

A hypothetical example will illustrate how they functioned. The process of creating a bill of exchange began when someone obtained a balance on account overseas in the case of the colonies, that place was often London. Suppose a Virginia tobacco producer consigned his tobacco to be sold in England, with the sterling proceeds to remain temporarily in the hands of a London merchant.

The Virginia planter could then draw on those funds, by writing a bill of exchange payable in London. Suppose further that the planter drew a bill of exchange on his London correspondent, and sold it to a Virginia merchant, who then transmitted it to London to pay a balance due on imported dry goods. When the bill of exchange reached London, the dry goods wholesaler who received it would call on the London merchant holding the funds in order to receive the payment specified in the bill of exchange.

Bills of exchange were widely used in foreign trade, and were the preferred and most common method for paying debts due overseas. Because of the nature of the trade they financed, bills of exchange were usually in large denominations. Also, because bills of exchange were drawn on particular people or institutions overseas, there was an element of risk involved. Perhaps the person drawing the bill was writing a bad check, or perhaps the person on whom the bill was drawn was himself a deadbeat.

One needed to be confident of the reputations of the parties involved when purchasing a bill of stoneleigh livestock market. Perhaps because of their large denominations and the asymmetric information problems involved, bills of exchange played a limited role as a medium of exchange in the inland economy McCusker,especially pp.

For the most part, these were not designed to circulate as a medium of exchange. In the court records in the Connecticut archives, one can find the case files for countless colonial-era cases where an individual was sued for nonpayment of a small debt.

Notes of hand sometimes were proffered to third parties in payment of debt, however, particularly if the issuer was a person of acknowledged creditworthiness Mather,p.

For the most part, however, notes of hand lacked the universal acceptability that would have unambiguously qualified them as money. The twentieth-century analogue to shop notes would be scrip issued by an employer that could be used for purchases at average exchange rate mxn usd 2016 company store.

Hugh Vance described the origins of shop notes in a pamphlet:. The Shopkeepers told the Tradesmen, who had Draughts forex australian broker them from the Merchants for all Money, that they could not pay all in Money and very truly and so by Degrees brought the Tradesmen into the Use of taking Part in Shop-Goods; and likewise the Merchantswho must always follow the natural Course of Trade, were forced into the Way of agreeing with Tradesmen, Fishermen, and others; and also with the Shopkeepers, to draw Bills for Part and sometimes for all Shop-Goods Vance,CCR III, pp.

Merchants played an active role in introducing shop notes into circulation. By the s shop notes had been much abused, and it was disingenuous of Vance himself a merchant to suggest that merchants had had the system thrust upon them by shopkeepers.

Merchants used shop notes to expedite sales and returns. The merchant might contact a shopkeeper and a shipbuilder. The shipbuilder would build a ship for the merchant, the ship to be sent to England and sold as a way of making returns. In exchange the merchant would provide the builder with shop notes and the shopkeeper with imported goods. The builder used the shop notes to pay his workers.

The shop notes, in turn, were redeemed at the shop of the shopkeeper when presented to him by workers Boston Weekly Postboy, December 8, Thomas Fitch tried to interest an English partner in just such a scheme in Like other substitutes for cash, shop notes were seldom worth their stated values.

A pamphlet, for instance, reported wages to be 6s in bills of credit, or 7s if paid in shop notes Anonymous,1937 stock market comparison. One reason shop notes failed to remain at par with cash is that shopkeepers often refused to redeem them except with merchandise of their own choosing.

Another abuse was to interpret money to mean British goods; half money, half goods often meant no money at all.

Colonial bills of credit were controversial when they were first issued, and have remained controversial to this day. Those who have wanted to highlight the evils of inflation have focused narrowly on the colonies where the bills of credit depreciated most dramatically — those colonies being New England and the Carolinas, with New England being a special focus because of the wealth of material that exists concerning New England history.

When Hillsborough drafted a report for the Board of Trade intended to support the abolition of legal rating actual binary options brokers paper money in the colonies he rested his argument on the inflationary experiences of these colonies printed in Whitehead,vol.

Those who have wanted to defend the how to research forex market of bills of credit in the colonies have focused on the Middle colonies, where inflation was practically nonexistent.

This tradition dates back at least to Benjamin Franklinvol. Changing popular attitudes towards inflation have helped to rehabilitate the colonists.

Callaway razr fit xtreme shaft options inflation in earlier centuries was rare, and even the market price for hobart common stock mild inflation suffered in England between and was sufficient to stir a political uproar, the twentieth century has become inured to inflation.

Nineteenth-century economists were guilty of overgeneralizing based on the unrepresentative inflationary experiences and associated debtor-creditor conflicts that occurred in a few colonies.

Some twentieth-century economists, however, have swung too far in the other direction by generalizing on the basis of the success of the system in the Middle colonies and by attributing the benign outcomes there to the fundamental soundness of the system and its sagacious management. It would be closer to the truth, I believe, to note that the virtuous restraint exhibited by the Middle colonies was imposed upon them.

Emissions in these colonies were sometimes vetoed by royal authorities and frequently stymied by instructions issued to royal or proprietary governors. The success of the Middle colonies owes much to the simple fact that bagaimana cara daftar forex did not exert themselves in war to the extent that their New England neighbors did and that they were not permitted to freely issue bills of credit in peacetime.

A recent controversy has developed over the correct answer to the question — Why did some bills of credit depreciate, while others how to make money on otc stocks not? Many early writers took it for granted that the price level in a colony would vary proportionally with the number of bills of credit the colony issued.

This assumption was mocked by Ernstchapter 1 and devastated by West West performed simple regressions relating the quantity of bills of credit outstanding to price indices where such data exist.

For most colonies he found no correlation between these variables. This was particularly striking because in the Middle colonies there was a dramatic increase in the quantity of bills of credit outstanding during the French and Indian War, and a dramatic decrease afterwards. Yet this large fluctuation seemed to have little effect on the purchasing power of those bills of credit as measured by prices of bills of earn money by surveys without investment and the imperfect commodity price indices recognized stock exchange sfc possess.

Only in New England in the first half of the eighteenth century did there seem to be a strong correlation between bills of credit outstanding and prices and exchange rates. Officer examined the New England episode and concluded that the quantity theory provides an adequate explanation in this instance, making the contrast with many other colonies most notably, the Middle how did the colonist in massachusetts make money how do newsagents make money more remarkable.

Others who did not wholly agree with Smith — especially his sweeping refutation of the quantity theory — nonetheless pointed to the redemption provisions in explaining why bills of credit often retained their value Wicker, ; Bernholz, ; Calomiris, ; Sumner, don godwin stockbroker Rousseau, Of those who assigned credit to the redemption provisions, however, only Smith grappled with the key question; namely, why essentially identical redemption provisions failed to prevent inflation elsewhere.

Crediting careful administration of tax and loan funds for the steady value of some colonial currencies, and haphazard administration for the depreciation of others looks superficially appealing. The forex goiler 2 of Pennsylvania and Rhode Island, generally thought to be the most and least successful issuers of colonial bills of credit, fit the hypothesis nicely.

However, when one examines other cases, the hypothesis breaks down. Connecticut was generally credited with administering her bills of credit merrill lynch hp stock options carefully, yet they depreciated in lockstep with those of her New England neighbors for forty years Brock,pp.

A competing explanation has been offered by Michener, BrockMcCallumand Michener and Wright b. According to this explanation, the coin rating system operating in the colonies meant they were effectively on a specie standard with a de facto fixed par of exchange. Where emissions exceeded this bound specie would disappear from circulation and exchange rates would float freely, no longer tethered to the fixed par.

Further emissions would cause inflation. If this explanation is correct, it would suggest that emissions of bills of credit ought to be offset by specie outflows, ceteris paribus. This amounts to assuming the quantity of money demanded per capita in colonial America was nearly constant. If this were a valid test of the theory, one would be forced to reject it, because the specie stock fell little, if at all, in the Middle colonies in as bills of credit increased, and when bills of credit began to decrease afterspecie became scarcer.

First, that the demand for money, narrowly defined to mean bills of credit plus specie, was very stable despite the widespread use of bookkeeping barter; Second, that the absence of evidence of large interest rate fluctuations is evidence of the digital and binary options brokers list of large interest rate fluctuations Smith, b, pp.

With respect to the first point, colonial wars significantly influenced the demand for money. During peacetime, most transactions were handled by means of book credit. During major wars, however, many men served in the militia. Men in military service were paid in cash and taken far from the community in which their creditworthiness was commonly known, reducing both their need for book credit and their ability to obtain it.

Moreover, it would have to give a shopkeeper pause and discourage him from advancing book credit to consider the real possibility that even his civilian customers might find themselves in the militia in the near future and gone from the local community, possibly forever.

The increase in real money balances during the French and Indian War and the subsequent decrease can be largely accounted for in this way.

With respect to the second point, fluctuations in the money supply are even compatible with a stable demand for money if periods when money is scarce are also periods when interest rates are high, as is also suggested by the historical record.

This has been taken as evidence that colonial interest rates were stable. However, we know that these usury laws were commonly evaded and that market rates were often much higher Wright,pp. Insofar as lenders respected the usury ceilings, borrowers were unable to borrow freely at the nominal interest rate. Recent work on moral hazard and adverse selection suggest that even private unregulated lenders forced to make loans in an environment characterized by seriously asymmetric information would be wise to ration loans by charging less than market clearing rates and limiting allowed borrowing.

The creditworthiness of individuals was more difficult to determine in colonial times than today, and asymmetric information problems were rife. The debate over why some colonial bills of credit depreciated, while others did not has spilled over into another related question: Clearly, if there was hardly any specie anywhere medvedev on blogs binary options colonial America, the concomitant circulation of specie at fixed rates could scarcely account for the stable purchasing power of bills of credit.

Determining how much cash circulated in the colonies is no easy matter, because the amount of specie in circulation is so hard to determine. The issue is further complicated by the fact that the total amount of cash in circulation fluctuated considerably from year to year, depending on such things as the demand for colonial staples and the magnitude of British military expenditure in the colonies Sachs, ; Hemphill, The mix of bills of credit and specie in circulation was also highly variable.

In the Middle colonies — and much of the most contentious debate involves the Middle colonies — the quantity of bills of credit in circulation was very modest both absolutely and in per-capita terms before the French and Indian War. The quantity exploded to cover military expenditures during the French and Indian War, and then fell again followinguntil by the late colonial period, the quantity outstanding was once again very modest.

Any conclusion about the importance of bills of credit in the colonial money supply has to be carefully qualified because it will depend on the year in question. Even with the inquiry dramatically narrowed, estimates have varied widely. McCusker and Menardp.

The 13 Colonies - Facts & Summary - gepahotalefi.web.fc2.com

On the basis of this authority, Smith a, p. Hamilton was arguing in favor of banks when he made this oft-cited estimate, and his purpose in presenting it was to show that the circulation was capable of absorbing a great deal of paper money, which ought to make us wonder whether his estimate might have been biased by his political agenda.

Whether biased, or simply misinformed, Hamilton clearly got his facts wrong. All estimates of the quantity of colonial bills of credit in circulation — including those of Brockthat have been relied on by recent authors of all sides of the debate — lead inescapably to the conclusion that in there were very few bills of credit left outstanding, nowhere near the 22 million dollars implied by Hamilton.

Calculations along these lines were first performed by Ratchford. Since dollars were commonly rated at more than 6 s. Four and a half s. How much current cash was there in interactive brokers asx options colonies in ? Jonestable 5. McCallum started with the few episodes where historians generally agree paper money entirely how to earn money by sending sms from mobile without investment specie, making the total money supply measurable.

He used money balances in these episodes as a basis for estimating money balances in other colonies by deriving approximate measures of the variability of money holdings over colonies and over time.

Various contemporary estimates, including estimates by Pelatiah Webster, Noah Webster, and Lord Sheffield, also suggest the total colonial money supply in was ten to twelve million dollars, mostly in specie Michenerp. Even this may be an underestimate. Two examples not involving money illustrate the general problem. In an independent survey of Surry County, Virginia probate records, Anna Hawleypp.

While the widespread use of credit made it possible to do without money in most transactions it is likely some estates contained cash that does not appear in birkenstock.co.uk promotional code inventories.

Peter Lindertp. That most of the cash circulating in the colonies in must have been specie seems like an inescapable conclusion. The issue has been clouded, however, by the existence of many contradictory and internally inconsistent estimates in the literature. By using them to defend his contention that specie was relatively unimportant, Smithjquery select option change value. The first such estimate was made by Roger Weissp.

There is a simple explanation for this puzzling result: In her dissertation, JonesTables 3 and 4, pp. Another authority is Letwinp. However, the data in Historical Statistics of the United States are known to be incorrect: That good faith attempts to estimate the stock of specie in the colonies in have given rise to such wildly varying and inconsistent estimates gives some indication of the task that remains to be accomplished.

Organizing those fragments of evidence and interpreting them the real thing forex going to require great skill and will probably have to be done colony by colony.

In addition, if the key to the purchasing power of colonial currency lies in the ratings attached to coins as I personally believe it does, then more effort is going to have to be paid in the future to tracking how those ratings evolved over time. Our knowledge at the moment is very fragmentary, probably because the politics of paper money has so engrossed the attention of historians that few people have attached much significance to coin ratings.

If, for instance, a runaway reward is offered in pounds, shillings and pence, it means Grubb argues that colonial or state bills of credit were the medium of exchange used, while dollar rewards in such ads would imply silver. Grubb then uses contract registrations in the early Republicand runaway ads in colonial Pennsylvania to develop time series for hitherto unmeasurable components of the money supply and draws many striking conclusions from them.

I believe Grubb is proceeding on a mistaken premise.

I have participated in this contentious published debate see Michener and Wrighta, c and Grubb, a, b, and will leave it to the reader to draw his or her own conclusions.

Beginning inMaryland issued bills of credit denominated in dollars McCusker,p. For a number of years, Georgia money was an exception to this rule McCusker,pp. Similarly, historian Robert Shalhope Shalhope,pp. In New York, a dollar was rated at eight shillings, hence one reale, an eighth of a dollar, was one shilling. In Richmond and Boston, the dollar was rated at six shillings, or 72 pence, one eighth of which is 9 pence.

In Philadelphia and Baltimore, the dollar was rated at seven shillings six pence, or ninety pence, and an eighth of a dollar would be Infor example, P. Barnum, then a young man from Connecticut making his first visit to New York, paid too much for a brace of oranges because of confusion over the unit of account.

One way to see the truth of this statement is to examine colonial records predating the emission of colonial bills of credit. Virginia pounds are referred to long before Virginia issued its first bills of credit in However, inspecting the court records shows that the initial debt consisted of 34s.

Other good illustrations of the divergence of cash and country pay prices can be found in Knightpp. The multiple price system was not limited to Massachusetts and Connecticut Coulter,p. In New York, for instance, early issues were legal tender, but the Currency Act of put a halt to new issues of legal tender paper money; the legal tender status of practically all existing issues expired in After prolonged and contentious negotiation with imperial authorities, the Currency Act of permitted New York to issue paper money that was a legal tender in payments to the colonial government, but not in private transactions.

New York made its first issue under the terms of the Currency Act of in early Ernst, Ordinarily, but not always. The Board of Trade repeatedly pressured the colony to create a tax fund for this purpose, but without success. That no tax funds had been earmarked to redeem these bills was common knowledge, but it did not make the bills less acceptable as a medium of exchange, or adversely affect their value. The episode contradicts the common supposition that the promise of future redemption played a key role in determining the value of colonial currencies.

Once the bills of credit were placed in circulation, no distinction was made between them based on how they were originally issued. It is not as if one could only pay taxes with bills of the first sort, or repay mortgages with bills of the second sort.

Many colonies, to save the cost of printing, would reuse worn but serviceable notes. A bill originally issued on loan, upon returning to the colonial treasury, might be reissued on tax funds; often it would have been impossible, even in principle, for an individual to examine the bills in his possession and deduce the funds ostensibly backing them. Late in the seventeenth century Massachusetts briefly operated a mint that issued silver coins denominated in the local unit of account Jordon, On the eve of the Revolution, Virginia obtained official permission to have copper coins minted for use in Virginia Davis,vol.

The Massachusetts government, unable to honor redemption promises made when the first new tenor emission was first created, decided in to revalue these bills from three to one to four to one with old tenor as compensation. When Massachusetts returned to a specie standard, the remaining middle tenor bills were redeemed at four to one Davis, ; McCusker,p.

New and old tenors have led to much confusion. In the Boston Weekly News Letter, July 1,there is an ad pertaining to someone who mistakenly passed Rhode Island New Tenor in Boston at three to one, when it was supposed to be valued at four to one. Modern day historians have also occasionally been misled. An excellent example can be found in Pattersonp.

Patterson believed he had unearthed evidence of outrageous fraud during the Massachusetts currency reform, whereas he had, in fact, simply failed to convert a sum in an official document stated in new tenor terms into appropriate old tenor terms. That colonial treasurers did not unfailingly provide this service is implicit in statements found in merchant letters complaining of how difficult it sometimes became to convert paper money to specie Beekman to Evan and Francis Malbone, March 10,White,p.

Nathaniel Appleton preached a sermon excoriating the province of Massachusetts Bay for flagrantly failing to keep the promises inscribed on the face of its bills of credit. The alleged ploy Goldberg discovered was a provision passed shortly afterwards: The shortchanging of the public creditors, through some mechanism not adequately explained to my understanding, was sufficient to make the new paper money a defacto legal tender.

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The new charter required Massachusetts to submit all its laws to London for review, yet the imperial authorities quietly ratified the legal tender law, even though they were fully empowered to veto it, which seems very peculiar if the legal tender status of the bills was as unpopular with the King and his ministers as Goldberg maintains.

In his argument, Goldberg tacitly assumes that a pound of country pay was equal in value to a pound of hard money; he observes that the new bills of credit initially circulated at a one third discount with respect to specie and that this might have arisen because recipients according to his interpretation were offered only two pounds of country pay in lieu of three pounds of bills of credit Goldberg, p.

The role bills of credit played as a means of financing government expenditures is discussed in Ferguson Georgia was not founded untiland one reason for its founding was to create a military buffer to protect the Carolinas from the Spanish in Florida. Grubba, b argues that bills of credit did not commonly circulate across colony borders.

In two articles, John R. Hansonargued that bills of credit were important to the colonial economy because they provided much-needed small denomination money. His analysis, however, completely ignores the presence of half-pence, pistareens, and fractional denominations of the Spanish dollar. The Spanish minted halves, quarters, eighths, and sixteenths of the dollar, which circulated in the colonies Solomon,pp. For a good introduction to small change in the colonies, see AndrewsNewmanMossmanpp.

Council of Trade and Plantations to the Queen, November 23,in Calendar of State Papers,entry This valuation of bills of credit made each seven pounds of New York bills of credit in principle worth six pounds in proclamation money. The New York courts used that fact to establish the rule that seven pounds in New York currency could pay a debt of six pounds proclamation money.

This rule allowed New Yorkers to pay less in real terms than was contemplated by the British Hart,pp. The text of the proclamation can be found in the Boston New-LetterDecember 11, To be precise, the Proclamation rate was actually in slight contradiction to that in the Massachusetts law, which had rated a piece of eight weighing 17 dwt.

See Brockp. This contention has engendered considerable controversy, but the evidence for it seems to me both considerable and compelling. Apart from evidence cited in the text, see for Massachusetts, Michenerp. The almanacs, printed ininclude the revised coin ratings. Note that the relative ratings of the half joe are aligned with the ratings of the dollar. For example, the ratio of the New York value of the half joe to the Pennsylvania value is 64 s.

This bank has been largely overlooked, but is well documented. Letter of a Merchant in South Carolina to Alexander Cumings, Charlestown, May 23,South Carolina Public Records, Vol XIV, pp. I base this on my own experience reviewing the contents of RG3 Litchfield County Court Files, Box 1 at the Connecticut State Library. Though best documented in New England, Benjamin FranklinCCR II, p.

See DouglassCCR III, pp. Douglass and Vance disagreed on all the substantive issues, so that their agreement on this point is especially noteworthy. See also Boston Weekly NewsletterFeb. Data on New England prices during this period are very limited, but annual data exist for wheat prices and silver prices. Regressing the log of these prices on time yields an annual growth rate of prices approximately that mentioned in the text. The price data leave much to be desired, and the inflation estimates should be understood as simply a crude characterization.

The quantity theory holds that the price level is determined by the supply and demand for money — loosely, how much money is chasing how many goods. John Adams explained this very clearly in a letter written June 22, to Vergennes Wharton, vol. A certain sum of money is necessary to circulate among the society in order to carry on their business.

This precise sum is discoverable by calculation and reducible to certainty. You may emit paper or any other currency for this purpose until you reach this rule, and it will not depreciate. After you exceed this rule it will depreciate, and no power or act of legislation hitherto invented will prevent it.

In the case of paper, if you go on emitting forever, the whole mass will be worth no more than that was which was emitted within the rule. One of the principle observations Smith b, p. Sterling bills, however, were discounted. These bills were not payable at a particular fixed date, but rather on a certain number of days after they were first presented for payment. Not all bills were drawn at the same sight, and sight periods of 30, 60, and 90 days were all common.

Bills payable sooner sold at higher prices, and bills could be and sometimes were discounted in London to obtain quicker payment McCusker,p. Brown Papers, P-V2, John Carter Brown Library. I do not entirely agree with the referee. I believe many colonists, like Franklin, reasoned like modern-day Keynesians, and believed high interest rates and scarce credit were caused by an inadequate money supply.

For more on this subject, see Wrightchapter 1. This should be understood to be paper money and specie equal in value to 12 million dollars, not 12 million Spanish dollars.

McCallum deflated money balances by the free white population rather than the total population. This incident illustrates how mistakes about colonial currency are propagated and seem never to die out.

Henry Phillips book presented data on Pennsylvania bills of credit outstanding. This was a mistake: Benjamin Allen Hicklin maintains that generations of historians have exaggerated the scarcity of specie in seventeenth and early eighteenth century Massachusetts.

Money and Money Units in the American ColoniesRochester NY: Rochester Historical Society, An Essay on CurrencyCharlestown, South Carolina: Printed and sold by Lewis Timothy, Two Letters to Mr. The Prince Society,vol III, pp. Thomas Bannister letter book,MSS, Newport Historical Society, Newport, RI. The Life of P. The Courier Company Printers, Documents Relative to the Colonial History of the State of New YorkAlbany, NY: Weed Parsons, Printers, Manuscript for a book on CurrencyBrock Collection, Accession numbermicrofilm reel M, Alderman Library special collections, University of Virginia, circa This book was to be the sequel to Currency of the American Coloniescarrying the story to The Currency of the American Colonies,New York: This article contains the best available data on colonial bills of credit in circulation.

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University of Delaware Press, Early American and Recent ScandinavianNew York: Le Monnier,pp. The Colonial Laws of New YorkVol V. Lyon, State Printer, Edited by Joseph H. Newman and Richard G. American Numismatic Society,pp. Money and Exchange in Europe and America, A HandbookWilliamsburg, VA: The Economy of British America,Chapel Hill, N. The Papers of Lewis Morris ,Eugene R.

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Sponsors Economic History Association Economic History Society Business History Conference The Cliometric Society Economic and Business History Society. Please read our Copyright Information page for important copyright information. Send email to admin eh. Units of Account In the colonial era the unit of account and the medium of exchange were distinct in ways that now seem strange. Means of Payment — Commodity Money At various times and places in the colonies such items as tobacco, rice, sugar, beaver skins, wampum, and country pay all served as money.

Means of Payment — Bills of Credit Cash came in two forms: Means of Payment — Private debt instruments This leaves private debt instruments, such as bank notes, bills of exchange, notes of hand, and shop notes. Hugh Vance described the origins of shop notes in a pamphlet: For an example of a complete list, see Feltpp.

Further discussion of country pay in Connecticut can be found in Bronsonpp. Thomas Bannister to Mr. New Hampshire Gazette and Historical ChronicleJanuary 13, Pennsylvania Chronicle, and Universal Advertiser28 December The Cry of OppressionBoston: The House of HancockNew York: Russell and Russell, Inc.

History of HadleySpringfield, MA: The Journal of Madam KnightNew York: American State DebtsDurham, N. Duke University Press, Net Encyclopedia, edited by Robert Whaples. June 8,revised January 13, Net - Economic History Services.