PAPER MONEY A CAUSE OF THE REVOLUTION. 7

defy any act of Parliament to be able to do it. They are grown so brassy and hardy as to be now combining in a body to raise a rebellion, and the day set for their coining to this town is at the election, and their treasurer, I am told, is in the bottom of the design, and I doubt it not. I have this day sent the sheriff and his officers to apprehend some of the heads of the conspirators.'

These continued disputes, which largely curtailed the use of an expedient which the colonists considered. necessary to their prosperity, together with the action of Parliament in restricting the issue of paper money, embittered the minds of the colonists against England, and had undoubtedly much to do with the final outbreak. The Bubble Act, which laid an interdict on all banking associations having no legal charter within the dominions of the king, was passed by Parliament in 1720. In 1740 another enactment was made, extending the provisions of the act of 1720 to the American colonies, where it had been disregarded. Banking in those days consisted merely in the privilege of issuing circulating notes, and this act restricted all private enterprises of this kind. On June 25, 1751, Parliament enacted a law forbidding paper money of the colonies to be passed, except for current expenses of the Government each year, or in case of invasion by the enemy. It seems also that these exceptional cases, where paper money was permitted, were to be under control of the Crown, as Mr. Bollan, the agent in London of the province of Massachusetts, writes that he opposed the bill on the ground that it might open the way for the unconstitutional exercise of the king's authority in the

colonies in other matters. Legal tender paper money was prohibited by this act of Parliament, and in 1763 such issues were declared void; but subsequently, in 1773, they were allowed to be received as legal tender at the treasuries of the several colonies.

CHAPTER II.

PAPER MONEY AUTHORIZED BY THE CONTINENTAL CON

GRESS.

THE Second Continental Congress was convened in 1775, and, in order to raise funds, having no power to institute taxation, naturally turned toward the expedient of an emission of paper money on the credit of the Union, but in the redemption of which each colony was to bear a part. The first issue was made in June, 1775. For a year these issues continued equal to gold; in two years they had depreciated to 2 for 1; in three years to 4 for 1; in nine months more their relative value was 10 for 1; in September, 1779, it was 20 for 1. Congress now determined that the total issues should not exceed $200,000,000, and renewed the declaration that this currency should be redeemed in full, and went to some labor to prove that the States had the ability to do So. In March, 1780, these issues had so depreciated that their value, as compared with specie, was as 40 to 1. Congress now required the whole to be brought in for redemption at its market value in coin, and also authorized the emission of new notes bearing interest at 5 per cent., and payable six years from date in silver and gold. These were to be exchanged in the proportion of 1 dollar of the new for 20 dollars of the old emission.

During the year 1780 the notes of the old issue sank first to 75 to 1, then ceased to circulate in the States north of the Potomac. In Virginia and North Carolina they passed for a year longer, and finally depreciated to 1,000 to 1, and then ceased to circulate.

According to Thomas Jefferson, but 200 millions of the first emission was issued, which was the amount authorized by resolution of Congress; but other authorities state the amount much higher. Joseph Nourse, register of the treasury in 1828, places it at $241,552,780. The amount as given in the treasury statement of 1843 was $242,100,176. The aggregate loss to the people of the country from this currency was estimated by Secretary Woodbury at $196,000,000. During the war paper money, distinct from the continental currency, was also issued by several of the States. The amount thus issued has been placed at $209,000,000, which is probably too high. It is, however, difficult to obtain exact information in reference to these emissions.

At the close of the war the minds of all classes were imbued with a wholesome antipathy to paper money, and as a consequence, when the Federal Constitution was under consideration, the power to emit bills, which in the original draft was given to the United States, was stricken out. Moreover, the original draft having contained a qualified permission to the States to issue paper money, an amendment was inserted which took away from the States all power to coin money, emit bills of credit, or make anything but gold or silver coin a tender in payment of debts. It has been held that the lack of power on the part of a State to coin money, taken in connection with the prohibition of the emission of bills, prevents the

VIEWS OF WEBSTER AND STORY.

11

issue of paper money by banks chartered by the State, as well as such issue by the State itself. This view was held by Daniel Webster, in his speech on the Bank of the United States, on the 25th and 28th of May, 1832, and his arguments are quoted with commendation by Mr. Justice Story, in his commentaries on the Constitution, as follows: "It will be hereafter seen that this (the power to coin money) is an exclusive power in Congress, the States being expressly prohibited from coining money. And it has been said by an eminent statesman that it is difficult to maintain, on the face of the Constitution itself, and independent of long-continued practice, the doctrine that the States, not being at liberty to coin money, can authorize the circulation of bank paper as currency at all. His reasoning deserves grave consideration, and is to the following effect: The States cannot coin money. Can they, then, coin that which becomes the actual and almost universal substitute for money? Is not the right of issuing paper intended for circulation in the place and as the representative of metallic currency, derived merely from the power of coining and regulating the metallic currency? Could Congress, if it did not possess the power of coining money and regulating the value of foreign coins, create a bank with the power to circulate bills? It would be difficult to make it out. Where, then, do the States, to whom all control over the metallic currency is altogether prohibited, obtain this power? It is true that in other countries private bankers, having no legal authority over the coin, issue notes for circulation. But this they do always with the consent of the Government, express or implied; and Government restrains and regulates all their operations at its pleasure. It would be a startling propo