a larger and better range for their Stocks, from such a small Beginning it was a great many years before it appeared there was any Increase of Inhabitants sufficient to form a Government the whole number of Taxables in Thirty years time not amounting to one thousand,

The poverty of the first inhabitants made (for want of a better currency) to Enact in their Assemblies that all Payments whatsoever, might be made in sundry Commodities or Products of the Province a List whereof here follows, agreeable to the Law as it past upon the Revise, Anno: 1715.

£

I

8

5

2

6

9

I

I

2

5

ΙΟ

3

6

8

I

Tar per Barrel full gauged

Whale Oil per Barrel

Beef per Barrel

This method has been continued down to this time with very little Alteration to the great Damage of the Revenue it being a stated rule, that of so many Commodities the worst sort were only paid. Altho' many attempts have been made to remedy the Inconvenience attending such a currency it has always proved fruitless (the People being generally fond of a Law which gave them such Advantages).

B. Tobacco Notes in Virginia, 1781 1

In addition to commodities, various forms of representative money were used by the colonists to make up for the scarcity of coin. Paper money based upon tobacco, upon land, upon a coin reserve, upon general commodities, and upon the credit of the government were tried in different colonies, but no one of them stood the test of time better than the tobacco notes of Virginia. These were first introduced in 1730 and were the subject of considerable legislation thereafter. They were still in general use in 1781, at which date they are described by Chastellux, a French officer who served in the Revolution and traveled quite extensively.

1 Travels in North-America, in the Years 1780, 1781, and 1782. By the Marquis François Jean) de Chastellux (London, 1787), 131-3.

We were just going out to take a walk, when we received a visit from Mr. Victor, whom I had seen at Williamsburgh; . . . [we] put ourselves under the guidance of Mr. Victor, who first took us to the warehouses or magazines of tobacco. These warehouses, of which there are numbers in Virginia, though, unfortunately, great part of them has been burned by the English, are under the direction of public authority. There are inspectors nominated to prove the quality of the tobacco brought by the planters, and if found good, they give a receipt for the quantity. The tobacco may then be considered as sold, these authentic receipts circulating as ready money in the country. For example: suppose I have deposited twenty hogsheads of tobacco at Petersburg, I may go fifty leagues thence to Alexandria or Fredericksburg, and buy horses, cloths, or any other article with these receipts, which circulate through a number of hands before they reach the merchant who purchases the tobacco for exportation. This is an excellent institution, for by this means tobacco becomes not only a sort of bank-stock, but current coin. You often hear the inhabitants say, "This watch cost me ten hogsheads of tobacco; this horse fifteen hogsheads; or, I have been offered twenty, &c." It is true that the price of this article, which seldom varies in peace, is subject to fluctuations in time of war; but then, he who receives it in payment, makes a free bargain, calculates the risks and expectations, and runs the hazard; in short we may look on this as a very useful establishment; it gives to commodities value and circulation, as soon as they are manufactured, and, in some measure, renders the planter independent of the merchant.

II. CREDIT MONEY

A. A Defence of Paper Money by a Colonial Governor, 17241

In 1690 Massachusetts, in order to pay the expenses of an expedition against Canada, issued what was probably the first emission of government paper money in the British Empire, certainly the first in America. The notes were to be redeemed out of the revenues from taxation, and were limited to a small amount. They proved to be a great convenience and served their purpose so well that a second issue was made in 1709. This example was followed in time by all the colonies except North Carolina. Many bad results followed-over-issue, depreciation, postponement of redemption, and in some cases repudiation. The British government early took a determined stand against these issues and instructed the colonial governors to veto all bills authorizing such issues. But the need of money in the colonies was

1 Documents relating to the Colonial History of New York. Edited by E. B. O'Callaghan (Albany, 1855), V, 735–8, passim.

so great that in spite of its defects paper money was justified by leading men like Franklin and defended by colonial governors like Burnet and Pownall. Burnet, the author of this letter, was governor of New York.

My Lords.

New York 21st Nov 1724

.. But this being an Act for making Paper Money, tho' within my additional Instruction which allows of such Acts when they are for raising or levying a publick Revenue.

I think myself obliged to offer to your Lordships Reasons that are in my poor opinion sufficient to justify it and other Acts of this Nature with the same precaution.

I am very sensible of the disadvantage I lye under in writing upon this argument, and the misfortune it is to any cause to have already appeared in an odious light, as I am but too well convinced is the case of paper money Acts in the Plantations, by your Lordships last words in your letter of the 17th of june - That Bills for encreasing of Paper money will meet with no encouragement - I hope your Lordships will not think it presumption in me even after this declaration to endeavor to give you a more favourable opinion of such Acts and if I go too far in this, it is owing to the encouragement your Lordships have given me by receiving what I have offered on all occasions in so kind a manner and admitting the best constructions that my weak Reasoning will bear.

I have already in my letter of the 12th of May last used several Arguments to justify the Paper Act in New Jersey, and therein I observed how well the Bills of New York keep up their credit and the reasons why they have not fall'n in value as those of Carolina and New England and that under a good regulation these Acts are both of Service to the Trade of the Plantations and of great Britain, for which that I may not repeat I beg leave to refer to my said letter of the 12th of May last and desire your Lordships would again take into your consideration when you are to determine your opinion on this present Act. . . .

I take the liberty further to observe to your Lordships on how many occasions the Government of Great Britain has found it impracticable to raise all the money wanted within the year from whence all the present debts of the nation have arisen: The same necessity lyes often upon the Plantations where frequenty a sum of ready money is wanted, which it would be an intollerable Tax to raise at once, and therefore they are forced to imitate the Parliament at home, in anticipating upon remote funds. And as there is no Bank nor

East India company nor even private subscribers capable of lending the Province the money they want at least without demanding the extravagant Interest of 8 Pr Cent which is the common Interest here, but would ruin the Publick to pay since this is a Case [where] there is no possible way left to make distant funds provide ready money, when it is necessarily wanted, but making paper Bills to be sunk by such funds. Without this Carolina would have been ruined

by their Indian War Boston could not now support theirs nor could any of the Provinces have furnished such considerable Sums to the Expeditions against Canada. Nor could at present any of the necessary repairs of this Fort be provided for, nor the arrears of the Revenue be discharged, which is done by this Act in a Tax to be levied in 4 years nor indeed any publick Service readily and sufficiently effected.

And I may add one thing more that this manner of compulsive credit does in fact keep up its value here and that it occasions much more Trade and business than would be without it and that more Specie is exported to England by reason of these Paper Bills than could be if there was no circulation but of Specie for which reason all the merchants here seem now well satisfied with it.

I hope your Lordships will excuse my being so long and earnest upon this head because it is a subject of the greatest importance to all the Plantations and what I humbly conceive has often been misrepresented by the Merchants in London. . . .

Your Ldp's mo. obt & mo. humble St.

Sgd W. BURNET.

B. The Land Bank and the Extension of the Bubble Act to the Colonies,

17411

In order to provide the people with a medium of exchange the colonial government of Massachusetts had for some years issued treasury notes which were to be redeemed out of taxes, and which circulated freely as money. But in 1739 the governor was instructed not to issue any more and to redeem those outstanding. Fearful of the effects of such a sudden contraction of the currency a scheme was brought forward by a group of citizens for a Land Bank, which should issue notes upon the security of land or commodities. This was opposed by the merchants of Boston, who organized in opposition a Silver Bank, which issued notes upon a deposit of silver. The opponents of the Land Bank, among whom Hutchinson was a leader, also invoked the authority of Parliament to put an end to it. In 1720 Parliament had passed the Bubble Act (6 Geo. I, ch. 18), directed against specula

1 The History of Massachusetts, from the First Settlement thereof in 1628, until the Year 1750. By Thomas Hutchinson (3d edition, Boston, 1795), II, 352-5.

tive companies, and they now declared that this act "did, does, and shall extend to the colonies in America." This act was retroactive and hence especially arbitrary. John Adams gave it as his opinion that this measure was more important than the Stamp Act in arousing opposition in Massachusetts to the English government.

A general dread of drawing in all the paper money without a substitution of any other instrument of trade in the place of it, disposed a great part of the Province to favour what was called the land bank or manufactory scheme, which was began or rather revived in this year 1739, and produced such great and lasting mischiefs, that a particular relation of the rise, progress and overthrow of it may be of use to discourage and prevent any attempts of the like nature in future ages. By a strange conduct in the general court, they had been issuing bills of credit for eight or ten years annually for charges of government, and being willing to ease each present year, they had put off the redemption of the bills as far as they could; but the governor being restrained by his instruction from going beyond the year 1741, that year was unreasonably loaded with thirty or forty thousand pounds sterling taxes, which, according to the general opinion of the people, it was impossible to levy, not only on account of the large sum, but because all the bills in the Province were but just sufficient to pay it, and there was very little silver or gold, which by an act of government was allowed to be paid for taxes as equivalent to the bills. A scheme was laid before the general court by the author of this history, then one of the representatives of Boston, in which it was proposed to borrow in England upon interest, and to import into the Province, a sum in silver equal to all the bills then extant, and therewith to redeem them from possessors, and furnish a currency for the inhabitants, and to repay the silver at distant periods, which would render the burden of taxes tolerable by an equal division on a number of future years, and would prevent the distress of trade by the loss of the only instrument, the bills of credit, without another provided in its place. But this proposal was rejected. . . . Royal instructions were no bar to the proceedings of private persons. The project of a bank in the year 1714 was revived. The projector of that bank now put himself at the head of seven or eight hundred persons, some few of rank and good estate, but generally of low condition among the plebians, and of small estate, and many of them perhaps insolvent. This notable company were to give credit to 150,000l. lawful money, to be issued in bills, each person being to mortgage a real estate in proportion