UNITED STATES NOTES.

CHAPTER I.

COLONIAL PAPER MONEY.

PREVIOUS to the Revolutionary War paper money was issued to a greater or less extent by each one of the thirteen colonies. The first issue was by Massachusetts in 1690, to aid in fitting out the expedition against Canada. Similar issues had been made by New Hampshire, Rhode Island, Connecticut, New York, and New Jersey, previous to the year 1711. South Carolina began to emit bills in 1712, Pennsylvania in 1723, Maryland in 1734, Delaware in 1739, Virginia in 1755, and Georgia in 1760. Originally the issues were authorized to meet the necessities of the colonial treasuries.

In Massachusetts, in 1715, as a remedy for the prevailing embarrassment of trade, a land bank was proposed with the right to issue circulating notes secured by land. John Colman, a merchant of Boston, urgently advocated its establishment. The land bank was forbidden by the Province Council, unless authorized by the General Assembly. There was a large party,

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however, in favor of paper money in some form. The plan for the land bank was defeated, but the issue of paper money by the treasury was authorized to the extent of £50,000, to be loaned on good mortgages in sums of not more than £500, nor less than £50, to one person. The rate of interest was 5 per cent., payable with one-fifth of the principal, annually. The bills were in form the same as those previously issued for the benefit of the treasury. This round sum or aggregate of £50,000, to be so loaned, was styled a bank, and was the first of the so-called loan banks, which were afterward authorized by nearly, if not quite, all of the colonies. In 1733 an issue of bills to the amount of £110,000 was made by the merchants of Boston, which were to be redeemed at the end of ten years, in silver, at the rate of 19 shillings per ounce. In 1739, the commercial and financial embarrassment still continuing, another land bank was started in Massachusetts. John Colman was one of the corporators. The stock of the land bank was to be £150,000. No one was permitted to subscribe more than £2,000, nor less than £100. The subscribers were to pay down lawful money at the rate of 40 shillings for every £1,000 subscribed, and for the remainder were to pledge security in lands to the satisfaction of the directors. They were to pay 3 per interest per annum, either in bills of the bank or in produce and manufactures, at prices regulated by the directors. Circulating notes equal to the capital were to be issued, payable in twenty years in produce or manufactures, and 5 per cent. of the capital was to be paid annually in the notes, produce, or articles manufactured. The "manufactures, being the produce of

cent.

FIRST PAPER MONEY ISSUED; BUBBLE ACT. 3

this province," were enumerated as follows: "Hemp, flax, cordage, bar iron, cast iron, linens, sheep's wools, copper, tanned leather, flaxseed, beeswax, bayberry wax, sail cloth or canvas, nails, tallow, lumber or cord wood, or logwood from New Spain." This scheme was strenuously opposed by Governor Belcher, but in spite of all opposition £49,250 of its notes were struck off, of which the treasurer of the company issued £35,582, and £4,067 were employed by the directors in trade.

A specie bank was also formed in 1739, by Edward Hutchinson and others, which issued bills to the amount £120,000, redeemable in fifteen years in silver, at 20 shillings per ounce, or gold pro rata. The payment of these notes was guaranteed by wealthy and responsible merchants. These notes, and those of a similar issue in 1733, were largely hoarded and did not pass generally into circulation.

In 1740 Parliament passed a bill to extend the act of 1720, known as the bubble act, to the American colonies, with the intention of breaking up all companies formed for the purpose of issuing paper money. Under this act both the land bank and the specie bank were forced to liquidate their affairs, though not without some resistance on the part of the former. The Governors of Massachusetts rendered themselves very obnoxious to the people by their determined opposition to these banks and to paper money generally, and Governor Belcher

1 An Historical Account of Massachusetts Currency, p. 103. Joseph B. Felt. Boston, 1839.

By

The History of Massachusetts Bay, vol. ii., p. 396. By LieutenantGovernor Hutchinson. Boston, 1767.

was recalled to England on account of misrepresentations of the paper money advocates, but was subsequently appointed Governor of New Jersey.

The paper money of the colonies, whether issued by them or by the loan banks, depreciated almost without exception as the amounts in circulation increased. The bills as originally emitted were intended to be equal to coin, but when depreciation advanced to such an extent as to appal the authorities, a new set of bills would be issued, with new assurances that they would be kept equal to coin. In these new bills the old bills would be redeemable at their depreciated value. Sometimes this second set of bills, having also depreciated, was replaced by a third set in the same way. These various sets were designated tenors; the terms old tenor, middle tenor, new tenor, new tenor 1st, new tenor 2d, being used to distinguish them. To give all the details of the depreciation of this currency in each of the colonies would require much space; but the best authorities agree that it underwent in all cases a constant diminution in value, inflicting loss and misery upon all classes of citizens. Pelatiah Webster says of this paper and the continental currency: "We have suffered more from this cause than from any other cause or calamity. It has killed more men, pervaded and corrupted the choicest interests of our country more, and done more injustice than even the arms and artifices of our enemies." The following table' gives the price of £100 in coin in the currencies of the several colonies in the year 1748:

A Short History of Paper Money and Banking in the United States, p. 10. By Wm. M. Gouge. Philadelphia, 1833.

The emission of bills by the colonies and the banks was not regarded with favor by the mother country, and the provincial governors were as a general thing opposed to these issues. They were consequently frequently embroiled with their legislatures. Felt, in his "Massachusetts Currency," gives examples of this controversy. Governor Belcher, in 1740, issued the following proclamation: "Whereas, a scheme for emitting bills or notes by John Colman, Esq., and others, was laid before the General Court in their session held the 5th of December, 1739, and by a report of a committee appointed by said Court, was represented, if carried on, to have a great tendency to endamage His Majesty's good subjects as to their properties; and whereas, application has been very lately made to me and His Majesty's Council, by a great number of men of the most considerable estates and business, praying that some proper method may be taken to prevent the inhabitants of this province being imposed upon by the said scheme; and it being very apparent that these bills or notes promise nothing of any determinate value, and can not have any general, certain or established credit; wherefore, I have thought fit, by and with the advice of His Majesty's Council, to issue this proclamation, hereby giving notice and warn