(Week 2 - Thursday Aug. 7)
As early as 1652, the Colony of Massachusetts had experienced a chronic shortage of circulating medium (i.e. lack of an adequate money supply), and so tried to remedy this situation by opening a mint to strike its own coins. This provided only very temporary relief, as the new coins soon found their way back to London in exchange for manufactured goods. The Colony remained poor and in debt to England, and its early commerce and development were severely stunted.
Then in February 1690, they got the idea for a "radical" solution to this problem. The Colony began to print its own money, called "bills of credit." By July 1692 these notes were declared "legal tender" (i.e. good for paying all debts), and began to circulate freely. These bills became the first government-issued paper money in the history of the Western world. What is more, they were not "backed" by gold, silver, commodities, land banks, mortgage contracts, or other schemes which mainly facilitate control of the system by an elite portion of the population. Rather they were issued publicly, in proportion to the practical need for a money supply, out the natural right of a society to issue its own money, and backed only by the free economic activity of the people of the Colony as a whole.
Massachusetts prospered with its newly printed "scrip" (paper money), and the other colonies soon copied its example. The Crown set itself in continuous opposition to these unapproved issues, and Parliament passed laws in an attempt to curb them. This set up conditions whereby there arose an open and widespread violation of the law, even by merchants and statesmen. Bonds of nationhood began to form, even as the colonist's unapproved currency facilitated its physical development. This, in turn, created an effective training ground for resisting subjugation which eventually found expression in Revolution. According to monetary historian
"The skirmishes at Lexington and Concord are considered the start of the Revolt, but the point of no return was probably May 10, 1775 when the Continental Congress assumed the power of sovereignty by issuing its own money."
Ben Franklin served in France as America's first ambassador. When asked about how he could explain the prosperous condition of the Colonies, he replied:
"That is simple. It is only because in the Colonies we issue our own money. It is called colonial scrip, and we issue it in proper proportion to the demand of trade and industry."
We as a society have been subjected to much myth-making regarding the American Revolution. Selected parts have been endlessly quoted and manipulated to promote partial agendas. I would assert that, without sufficient understanding of the central importance of the struggle over who had the right to create, issue and control the colonies' money supply (the public through its elected representatives – vs.- the monarchy through the Bank of England), we cannot comprehend fully the meaning of the Revolution. We need to understand what Franklin meant when he said:
"The Colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the Colonies (the right to issue) their money, which created unemployment and dissatisfaction."
This leads us back to the inspiration behind the Concord Resolution, which I will take up in tomorrow's column.
The complete set of columns from this series is posted at the following websites: