Shylock: as banker
It would fill a cyclopaedia to estimate and describe the wickedness, the poverty and misery, which the British banking-policy and those who live by its wreckage have wrought in America. So far as control by it could be forced upon the Colonies, before the Revolution, it was an unmitigated curse to them and it has been an ever-recurring stroke of paralysis from the beginning to the end of our history.
The early colonists of the United States exchanged their productions and property chiefly through the primitive means of barter. The little gold and silver brought with them from Europe was quickly sent back to procure the ordinary necessities of civilized life. The few exports were turned to the same account. Coin could not he kept in the country, though various attempts were made to retain it. The first legal tender established by Massachusetts was the beads of the Indians, called wampum; and as far as it went it answered the purpose of money quite as well as English gold or Spanish silver.
But, six years before the Bank of England was instituted, the infant colony made a paper-issue to pay her soldiers who had been sent on an expedition against Canada. The issue was for seven thousand pounds, in notes from five shillings to five pounds, redeemable in taxes that is, in the inevitable debts of those who held the paper and of all citizens who owned property. Let us glance at the form of one of these notes. [See address by Charles Sumner, U.S. Senate, Feb. 13th, 1862.]
" This indented bill of ten shillings, due from the Massachusetts colony to the possessor, shall be in value equal to money, and shall be accordingly accepted by the treasurer and receivers subordinate to him, in all public payments, and for any stock (cattle) at any time in the treasury."
The colony notes, we observe, were not made a legal tender not stamped as money to pay private debts; but in 1692 it was ordered that they should be received by the treasury at five per cent over coin. This "fiat" brought them at once to par with gold, and they stayed there for twenty years, until taken up in the revenues of the colony. Similar but larger issues were subsequently authorized as the only way to furnish a currency and promote the growth of the province. In 1773 the whole people of Massachusetts were in a prosperous condition and the colony was out of debt.
Other colonies Connecticut, New York, Pennsylvania, Maryland, Delaware issued the same kind of bills at about the same time. In 1755 Virginia put out her notes to sustain the war of that period and guaranteed their redemption in a specific tax. To make sure of success, the notes bore five per cent interest. Their history was afterward written by the same hand that drafted the Declaration of Independence the hand of Thomas Jefferson. "Not a bill of this emission," said he, "was found in circulation." And why ? It was so popular and well-accredited that "it was locked up in the chests of executors, guardians, widows, farmers." We "then issued bills bottomed on a redeeming tax but bearing no interest. These were received and never depreciated a single farthing." [Letter to John W. Epps, June 24th, 1813.]
The history of another issue of Colonial money has been given by Benjamin Franklin. In his statement to the British Board of Trade in 1764, Dr. Franklin said that in 1723 Pennsylvania had been "totally stripped of its gold and silver," the "chief part of the trade being carried on by the extremely inconvenient method of barter." But, "paper money" being "first made there," gave "new life to business, promoted greatly the settlement of new lands, whereby the province has so greatly increased in inhabitants that the export from thence thither is more than ten fold what it was."
The record of still another issue of Colonial money has been left to us in the eloquence of John C. Calhoun. On the 18th of September, 1837, pressing the issue of United States treasury notes, to relieve the government and the people then floundering in a general bank-suspension, Mr. Calhoun said:
"It is my impression that, in the present condition of the world, a paper currency is almost indispensable in financial and commercial operations of civilized and extensive communities. In many respects it has a vast superiority over a metallic currency, especially in great and extended transactions, by its greater cheapness, lightness, and the facility of determining the amount. * * * It may throw some light on the subject to state that North Carolina, just after the Revolution, issued a large amount of paper which was made receivable in dues to her; it was also made a legal tender, but which, of course, was not obligatory after the adoption of the Federal Constitution. A large amount, say between four and five hundred thousand dollars, remained in circulation after that period and continued to circulate for more than twenty years at par with gold and silver during the whole time, with no other advantage than being received in the revenue of the State, which was much less than one hundred thousand dollars."
It would be interesting to extend our information of this kind, derived from the great founders of American institutions and the early statesmen of the republic. But a word must suffice. It was no "gold standard," it was no bank-paper, but it was government-issues, good for public revenue, and aided chiefly by a little silver, that nourished and stimulated the growth of the thirteen American colonies into a condition to defy England and achieve their independence.
In 1763 the British. Parliament declared all colonial acts for the issue of paper currency to be void. "Every medium of exchange," said the British Board of Trade, "should have an intrinsic value, which paper has not." Dr. Franklin there and then exploded this bosh more than a century and a quarter ago though many parrots are still repeating it.
"However fit," (said Franklin), "a particular thing may be for a particular purpose, whenever that thing is not to be had, or not to be had in sufficient quantity, it becomes necessary to use something else, the fittest thing that can be got in lieu of it. Bank bills and bankers notes are in daily use here [in London], as a medium of trade, yet they have no intrinsic value, but rest on the credit of those that issued them, as paper bills in the colonies do on the credit of the respective settlements there. * * * Being payable in cash upon sight by the drawers is indeed a circumstance that cannot attend the colony bills, their cash being drawn from them by the British trade; but the legal tender being instituted, is rather a greater advantage to the possessor, since he need not be at the trouble of going to a particular bank or banker to demand the money. At this very time," (continued Franklin), "the silver money in England is obliged to the legal tender for a part of its value that part which is the difference between its real weight and its denomination. Great part of the shillings and sixpences now current are, in wearing, become five, ten, twenty, and some of the sixpences even fifty per cent too light. For this difference between the real and nominal you have no intrinsic value; you have not so much as paper; you have nothing. It is the legal tender, with the knowledge that it can easily be repassed for the same value, that makes three penny worth of silver pass for six pence." [Works: Duanes edition, 1809, vol. 4, page 87.]
The real objection, of course, to Colonial Paper Money on the part of England was the fear it would render the colonies too independent of British rule and the British money-power. Dr. Franklins unanswerable common-sense was wasted on the buccaneers of the gold-pot, just as all truth is wasted on them now. But a dozen years after his protest came the battle of Bunker Hill and the Continental army; and with these came "Continental money."
Continental money, as Mr. Calhoun said in the greatest of his financial speeches, "is a ghost that is ever conjured up by all who wish to give the banks an exclusive monopoly of government credit." [Oct. 3d, 1837.] But those who are not grossly ignorant of American history know well enough that Continental money was a remarkably effective weapon for its purpose and that considering its results, it was the best investment for the human family that was ever made, in any country or in any age. American Patriots those who whipped both the Red-Coats and the Tories by its aid, and then bore the losses connected with it rejoiced rather than whined over them. That same immortal pen, again, which drafted the Declaration of Independence and the Constitution of Virginia, has summed up this matter in a way to leave nothing open for argument. [Jeffersons Works, vol. 9, page 249.]
"Continental money" [says Jefferson] expired without a groan. Not a murmur was heard among the people. On the contrary, universal congratulation took place on their seeing the gigantic mass quietly inferred in its grave. Foreigners, indeed, have been loud, and still are loud, in their complaints. A few of them have reason; but the most noisy are not the best. They are persons who have become bankrupt by unskillful attempts at commerce with America. That they may have some pretext to offer to their creditors, they have bought up great masses of this dead money of America, where it is to be had at five thousand for one, and they show the certificates of their paper possessions, as if they had died in their hands and had been the cause of their bankruptcy."
At the commencement of the Revolution the population of the thirteen Colonies was two millions and a half, and their property six hundred millions of dollars. They had five millions of dollars in specie. On such a basis, Congress issued during the war about two hundred millions of dollars in bills of credit a third of the whole property of the country and these were counterfeited, without stint, by the British defenders of "honest money" that they might help their Hessian mercenaries to defeat Washington and his army.
But what was this continental money, the remembrance of which has stricken so many misers with ague and grip ? It was no "fiat-money" no accredited paper of a strong government, redeemable in revenue, at a fixed standard of value, and held at par by limit of volume. "Continental money," on the contrary, was issued according to the approved tenets of the Specie Basis. The bills promised to pay, a few years from date, their face with interest in "Spanish milled dollars." They were emitted on the authority of the several States, with the indorsement of Congress that the United States would "insure the payment," and would "draw bills of exchange, annually, if demanded." The fulfillment of these promises was impossible. They were made in good faith and with the hope of speedy success for the American army. For a year the bills circulated at par with silver and in their third year the premium on the coin was only seventy-five per cent. But as the struggle continued, the people came to realize the huge joke of attempting to redeem, "in Spanish milled dollars," an amount of paper, genuine and counterfeit, calling for more than fifty times the whole sum of coin in the country, and counting interest, three or four hundred times the sum of the coin specified in the promises. Still, the paper circulated; and the determined, patriotic people kept passing it from hand to hand, as it went down, buying and selling with it receiving it for something until 1781. It then sank out of sight at a depreciation of five hundred per cent., but "with indulgence for its memory," said Jefferson, "as a thing which had vindicated the liberties of the country" and "fallen in the moment of victory." In other words, the American people came to regard the loss on Continental money a loss borne by the whole of them as a general tax on their property, to secure American independence. Thus the losers were not cheated. It was they, in fact, who insisted on letting their losses go, and would sanction no attempt to recover them. Congress did its best to fulfill its pledges, but the people laughed away every effort to fund or redeem the currency, and "barbers papered their shops with it." For once we got the better of British bullionists and counterfeiters.
1 For details consult "Sumners History of American Currency," and "Historical Sketches of American Paper Currency," by Henry Phillips, Jr., A.M.
2 To bankers and bullionists, John Sherman is now their great authority on money for considerations mutually satisfactory. But, on the 13th of February, 1862, this same John Sherman said in the Senate: "I much prefer the credit of the United States, based as it is upon all the productions and property of the United States, to the issues of any corporation, however well guarantied and managed. * * * The only objection to the issue of this paper money (the greenbacks) is that too many may be issued. * * * If, in our Revolutionary war, the amount of the Revolutionary scrip, and in the French Revolution the amount of assignats, had been confined to a small sum in proportion to the wealth of the country if, for instance, it had been limited to one tenth of the annual production of the country there would have been no danger."