Paper Currency – Not a Modern Idea

Robyn Doran // AMH 4110.0M01 – Colonial America, 1607-1763

When one thinks of the world of the eighteenth century, especially related to trade and commerce, one may think of small stores with raw goods, the sale of tobacco, or gold and silver coins being scooped up by a store merchant. What one might not consider when first recalling such a time is other types of currency that circulated throughout the British colonies during the 1700s. British sterling (pounds, shillings, and pence) were, of course, prominent in the colonies but they were not the only type of currency available. Spanish pistoles, silver dollars, commodity goods, and currency from individual colonies were also distributed throughout the British colonies during the seventeenth and eighteenth centuries.

In the seventeenth and eighteenth centuries, Britain’s American colonies were thriving. However, that did not mean that there was a surplus of British sterling for them to use. When Britain founded the colonies in North America, the economic belief of mercantilism produced the idea that the colonies were there to create a surplus of goods for the mother country, not to drain the precious metal from the homeland.^[1] While the British system of monetary units—such as pound, shilling, and pence—continued in the North American colonies, there was a deficit of British sterling in any of the colonies.^[2] Because of this deficit, the colonies turned to other types of monetary units to use for payment.

One type of money the colonies used was foreign coins. Some examples were Spanish pistoles and silver dollars. Most of these coins were imported from the Spanish colonies of Mexico and Peru.^[3] Their worth compared to British sterling fluctuated quite a bit throughout the colonies and over time. However, just like several other types of colonial currency (such as the individual paper currency of each colony) they remained less valuable than British sterling.^[4] Unfortunately, the age-old problem endured. There were not enough precious metals to go around. This was due to the philosophy of mercantilism—the belief that a country should accumulate and hold as much money (precious metal) as possible.^[5] As a result of this philosophy, precious metals were not as readily available in colonies belonging to any country.^[6]

Another way colonists traded with each other was commodity goods. These were items such as tobacco or various animal skins that could be used within the colonies as currency.^[7] Due to the unwieldy nature of commodity goods, the colonies devised another form of exchange: paper currency uniquely created by each colony.

The first paper currency printed in the colonies was in December 1690. The Massachusetts Bay Colony needed to pay for military expenses from King William’s War but did not have the money to do so. Finding this to be successful, Massachusetts created legislation that would be the start of paper currency in that colony.^[8] Other colonies followed suit throughout the eighteenth century, with Virginia being one of the last and most reluctant to do so in 1755.^[9] The primary reason Virginia started printing money is because of the economic demands of the French and Indian War.^[10] This type of exchange became prominent in all economies of the British colonies, although this locally printed paper currency was still considered less valuable than British sterling. In 1748, Virginia’s local currency had an exchange rate with British sterling of 10 to 1.^[11] Here, you can see an image of a Virginian 5 pound James River Bank currency note issued in 1773.^[12]

As the paper currency of the colonies became more widespread, it started showing up in store ledgers. The Colchester store in Virginia belonging to John Glassford and managed by Alexander Henderson was one such store where paper currency became very prominent. Merchandise was sold to customers in both Virginia currency and British sterling; customers paid for their merchandise with both forms of money, as well as commodity goods like tobacco. Below, a folio from the Colchester ledger (1760-1761) shows a client paying for all his purchases from November 1760 to March 1761 in Virginia paper currency.^[13] British sterling was not included in any of his transactions. While there are many purchases in the ledger that were made in British sterling, it is obvious from this image that local currency was important to trade.

Printed currency was an important form of payment in the British colonies. It kept trade thriving without the need of coins and allowed colonies to pay their debts and stay afloat. Of course, the colonies’ ability to create new money whenever needed was dangerous as it led to inflation, especially in times of war.^[14] However, the benefits outweighed the risks as the colonies found a way to overcome the deficit of precious metals in North America. Paper currency became vital to the survival of America until the British colonies became the United States.

 

 

^[1] Louis Jordan, “The Value of Money in Colonial America,” Colonial Currency, last edited February 1, 1998,
accessed March 21, 2017, https://coins.nd.edu/ColCurrency/CurrencyIntros/IntroValue.html.

^[2] Jordan, “Value of Money in Colonial America.”

^[3] Ibid.

^[4] Ron Michener, “Money in the American Colonies,” EH.net Encyclopedia, last modified January 13, 2011, accessed March 23, 2017, https://eh.net/encyclopedia/money-in-the-american-colonies/.

^[5] Encyclopedia Britannica Online, “Mercantilism,” accessed April 18, 2017, https://www.britannica.com/topic/mercantilism.

^[6] Encyclopedia Britannica Online, “Mercantilism.”

^[7] Jordan, “Value of Money in Colonial America.”

^[8] Louis Jordan, “The First Printed Currency – 1690,” Colonial Currency, last edited February 1, 1998, accessed March 23, 2017, https://coins.nd.edu/ColCurrency/CurrencyIntros/IntroEarliest.html.

^[9] Thomas E. Davidson, “Colonial Paper Money,” American Revolution Museum at Yorktown Galleries, accessed April 20, 2017, https://www.historyisfun.org/exhibitions/collections-and-exhibitions/yorktown-victory-center-
galleries/colonial-paper-money/.

^[10] Omohundro Institute of Early American History and Culture, “Paper Money in Colonial Virginia,” The William and Mary Quarterly 20, no. 4 (April 1912): 228.

^[11] Omohundro Institute, “Paper Money in Colonial Virginia,” 252.

^[12] Davidson, “Colonial Paper Money.”

^[13] Alexander Henderson, et. al. Ledger 1760-1761, Colchester, Virginia folio 43 Credit, from the John Glassford and Company Records, Manuscript Division, Library of Congress, Washington, D.C., Microfilm Reel 58 (owned by the Mount Vernon Ladies’ Association).

^[14] Roger W. Weiss, “The Issue of Paper Money in the American Colonies, 1720-1774,” Journal of Economic History 30, no. 4 (December 1970): 772.