Money of the Eighteenth Century

MONEY OF THE EIGHTEENTH CENTURY. A chronic shortage of specie existed in the British colonies before 1775. The colonies mined no precious metals and, because the cost of imports always exceeded the value of exports, most of the specie that flowed into the colonies flowed back out to Britain to pay for imported goods. Efforts to create a circulating currency were closely regulated by Britain, so the colonists were compelled to use readily available commodities like tobacco as substitutes and to maintain complicated accounts of book debts. Britain also discouraged colonial efforts to coin money, like the crude silver pieces minted in Massachusetts between 1652 and 1682, the best-known of which was the Pine Tree shilling, about the size of a modern quarter.

In the absence of locally minted coins, many different coins minted by the imperial powers circulated in the British colonies. The value of these coins was based on intrinsic value, fineness, and weight, the latter being affected by wear and sometimes by clipping or other forms of mutilation. Spanish coins, most of them minted in the New World, eventually predominated, especially the Spanish milled dollar or piece of eight, a silver coin about the size of a modern silver dollar.

Paper money was produced in the colonies for the first time in 1690, when Massachusetts printed twenty-shilling bills of credit to pay for the expedition against Canada. Britain monitored the paper bills of credit issued thereafter by the colonies, most closely in New England, an effort that generally kept the depreciation of the currency under reasonable control. It has been estimated that the money supply in 1775 amounted to over twelve million dollars, about four million in paper currency and the rest, perhaps as much as ten million dollars, in specie.

After 1775 the high demand for all metals and the flood of new paper currency combined to drive specie out of circulation. The only coins minted during the war were the Continental dollars of 1776 (six thousand in pewter, many fewer in brass and silver) and a handful of Massachusetts and New Hampshire patterns; the new nation relied almost entirely on various forms of paper money as its circulating currency until 1780, when specie became more plentiful. Shortly after the Articles of Confederation took effect on 1 March 1781, Robert Morris, the superintendent of finance, began to make plans to establish a mint, an authority given to Congress by Article 9. However, by the time he had the plan in place in August 1783, the end of the war, the scarcity of silver bullion, and the need to economize on congressional expenses combined to scuttle the project. The first dollar coins were issued by the United States in 1794, modeled on the Spanish dollar.

Money accounts in the colonies were almost always kept in pounds, shillings, and pence: twelve pence to a shilling and twenty shillings (240 pence) to a pound. Money reckoned in "pounds sterling," in values tied to specie by the British government, was always worth more than any of the local currencies, which were also denominated in pounds, shillings, and pence and whose value against sterling fluctuated widely across the colonies. In the late colonial period, a British pound sterling had a value of one pound 6 shillings 89 pence (320 pence) in Massachusetts, one pound 13 shillings 4 pence (400 pence) in Pennsylvania, and one pound 15 shillings 7 pence (427 pence) in New York. Maryland issued the first paper money denominated in dollars in 1767. When Congress authorized the emission of three million dollars on 22 June 1775, it made the paper money payable in Spanish milled dollars; a Spanish dollar was worth roughly 4 shillings 6 pence in sterling, 6 shillings in Massachusetts, 7 shillings 6 pence in Pennsylvania, and 8 shillings in New York. In his report to Congress (2 September 1776) on the value of the coins in circulation relative to the Spanish milled dollar, Thomas Jefferson was the first to use a decimal notation, and he continued to be an advocate of the system. On 6 July 1785, while Jefferson was in Paris as minister to France, Congress adopted his decimal system, with the dollar as the standard unit.

SEE ALSO Continental Currency; Hard Money; Specie.

BIBLIOGRAPHY

Jordan, Louis. The Coins of Colonial and Early America. Robert H. Gore, Jr., Numismatic Endowment, Department of Special Collections. University of Notre Dame, South Bend, Ind. Available online at http://www.coins.ed.edu.

――――――. Colonial Currency. Robert H. Gore, Jr., Numismatic Endowment, Department of Special Collections. University of Notre Dame, South Bend, Ind.. Available online at http://www.coins.ed.edu.

Michener, Ronald. "Backing Theories and the Currencies of Eighteenth-Century America: A Comment." Journal of Economic History. 48 (September 1988): 682-692.

Mossman, Philip. Money of the American Colonies and Confederation Period: A Numismatic, Economic, and Historical Correlation. New York: American Numismatic Society, 1993.

Newman, Eric P. The Early Paper Money of America. 4th ed. Iola, Wis.: Krause Publications, 1997.

――――――. and Richard Doty, eds. Studies on Money in Early America. New York: American Numismatic Society, 1976.

                         revised by Harold E. Selesky