CHAPTER 14 – PART 2 U.S. COLONIAL MONEYS The Lost Science of Money COLONIAL BILL OF CREDIT, NEWBERN, N.C. CONTINENTAL BILL OF CREDIT, PHILADELPHIA, PA

CHAPTER 14 – PART 2U.S. COLONIAL MONEYS

The Lost Science of Money

COLONIAL BILL OF CREDIT,NEWBERN, N.C.

CONTINENTALBILL OF CREDIT,PHILADELPHIA, PA.

THEMES OF LOST SCIENCE OF MONEY BOOK

1. Primary importance of the money power (power to create money and regulate it)

2. Nature of money purposely kept secret and confused

3. How a society defines money determines who controls the society

4. Battle over control of money has raged for millennia: public vs private

5. The misuse of the monetary system causes tremendous misery and suffering for the ordinary working people. Will Decker & Martin Dunn, February 2014

PARTS OF PRESENTATION1. Timeline2. Lords of Trade and Plantations Attack Colonial Money: But Pennsylvania’s Money Worked3. A Different Story: Massachusetts Deflated4. 1741 No “Partial Schemes of Private Men”5. 1751 & 1764 Currency Acts6. The Monetary Cause of the Revolution7. Continental Currency – Lifeblood of the Revolution8. Limitations of the Continental Currency9. Massive British Counterfeiting of the Continentals10. Breakdown of the Continental Currency11. The French Factor in the Revolution12. The Darkest Hour of the Revolution13. All in All, A Remarkable Performance by the Continentals14. The Aftermath of the Continental Currency

PART 1

Timeline

TIMELINE 1720 -- 1775

LONDON _|___________________________|______________|_______|______|______|______|____ 1720 1741 1751 1764 1766 1773 1775

PA___|__________|____|________________________________________________________ 1723 1726 1729

MASS____________|_____|____|________________|_______________|_____________ 1727 1730 1735 1751 1766

LONDON SUSPENDS NEWISSUES UNLESS APPROVED

LONDON FORBIDSPRIVATE ISSUES

1ST CURRENCY ACT:NEW ENGLANDPROHIBITED FROM NEW ISSUES

1764 2ND CURRENCY ACT: ALL COLONIES CANNOT MAKE LEGAL TENDER

FRANKLINTO LONDON

1773 LONDONRECONSIDERS

1ST

CONTINENTAL CONGRESS

PA’S FIRSTISSUE

1726 LONDON ORDERSREDEMPTION ANDNO FURTHER ISSUES

GOV/ASSEMBLY DEFIES LONDON:NEW ISSUE OF 30,000£; REISSUES 40,000£

1727 LONDON ORDERSREDEMPTION OF ALLISSUES; NO NEW ISSUES

1730 GOV CONTINUESCONTRACTION FROM140,000 £ TO 30,000 £

1735 TAXES PAID IN COMMODITIES

DEFLATION========================

ASSEMBLY ISSUESMORE NOTES

157,000 £ OUTSTANDING

Timeline 1775 -- 1781

_|_________|_______|_______|______|_______|__________|__________|_______|__1775 1776 1777 1778 1779 1780 2/1781 5/1781 10/1781

5/1775 1ST

CONTINENTAL CONGRESS

6/1775CONGRESSISSUES FIRSTBILLS – MANTLEOF SOVEREIGNTY

12/1775 6.0 mill $ Contin 3.8 mill $ colonial 9.2 mill $ coin18.0 mill TOTAL

7/1776 DECL OF INDEPENDENCE

2/1778 FRANCE RECOGNIZES U.S.

7/1778ARTICLES OF CONFEDERATION RATIFIED

9/1778CONFEDERATION SETS MAX ISSUE AT 200 MILL $

CONTIN -- LATE 1776 5% DISCOUNT 9/1779 90% DISCOUNT 5/1781 500:1

1775 – 1783 STATE ISSUES ================================================================================

6/1780 NO MONEY; WASHINGTON WRITES OF POSSIBLE MUTINY

7/17/1780 PRIVATE SUBSCRIPTION AUTHTO START OPERATIONS – FOOD FOR ARMY & RECRUITING BOUNTIES

2/1781 MORRISAPPOINTEDSUPERINTENDENTOF FINANCE

5/1781 BANKOF NORTHAMERICAPASSED BYCONGRESS(PASSED BY 1 VOTE)

10/1781BR SURRENDERAT YORKTOWN

PART 2

Lords of Trade and Plantations Attack Colonial Money:But Pennsylvania’s Money Worked

Lords of Trade and Plantations Attack Colonial Money

Example of complaint to the London Board of Trade by merchants, 1717:

“…answered that they were traders to the said Province, that they had lately received fresh accounts from New York of the inconveniences of the said Act contained in an anonimous paper …. They further proceeded to shew the general hardships of the Act upon the inhabitants of New York, that the issuing new bills of credit had altered the value of silver there from 8s. 3d. per ounce, which the former bills passed at, to 9s. 3d. which is now the rate of all their bills of credit, and that these bills will not be taken in the Province of New Jersey. That the said Capt. Downing was forced to take these bills for his freight.

LONDON BOARD OF TRADE:FROM 1720, MOST NEW COLONIAL MONEYISSUES WERE CONSIDERED SUSPENDED UNTILSPECIFICALLY APPROVED BY THE CROWN

MERCHANTS COMPLAIN TO LORDS OF TRADE ABOUT COLONIAL PAPER MONEY


MINUTES OF LORDS OF TRADE, MAY, 1726: “Pennsylvania. … their Lordships took again into consideration the following Acts, passed in Pennsylvania, viz:

• An Act for the emitting and making current £15,000 in Bills of Credit.. Passed the 2nd March, 1722–3.

• An Act for emitting and making current £15,000 in Bills of Credit. Passed the 30th March, 1723.• An Act for emitting and making current £15,000 in Bills of Credit Passed 11th May, 1723.• An Act for emitting and making current £30,000 in Bills of Credit.

Their Lordships then desired Mr. Gee would inform the Board what he had to offer concerning the said Acts. … he feared several ill consequences might attend the repeal of these Acts, as the Bills, thereby directed to be made current, were already issued, and at present circulating in the trade of that province.

He therefore, desired their Lordships would please to let the said Acts lye by, and, in order to prevent the increase of paper money for the future, that their Lordships would signify to Major Gordon, Governor of Pennsylvania, their disapprobation of Acts of this nature.

1726 - THE LORDS OF TRADE CONDEMNED PENNSYLVANIA’S MONEY AND ORDERED EXISTING NOTES RETIRED ON SCHEDULE


A Reign of Prosperity — Philadelphia had become the leading city in the country; its business was in a flourishing condition, and the multitude of ships at its wharves gave evidence of a rich foreign trade. Within thirty years, from 1720 to 1750, the number of vessels sailing from this busy city increased from less than a hundred to more than four hundred, while its imports became ten times as great and its exports over three times as great.

In the rural regions the farming population were happy and thriving, owning their own lands and finding a good market for all they could raise. There was a growing trade with the western Indians, who wanted the goods that the [Europeans] had to sell, and the demand for labor was so great that wages had not fallen, though within twenty years the population had nearly doubled and thirty thousand working men had come into the province.

http://www.celebrateboston.com/history/pa/albany-congress-and-fort-necessity.htm

DURING THE YEARS OF QUIET PROGRESS, THE POPULATION OF PENNSYLVANIA HAD STEADILY GROWN AND WEALTH AND PROSPERITY INCREASED.


By the late 1720s opposition to paper money among Pennsylvania merchants had lessened, and the time seemed propitious to enact another currency bill.

Responding, in part, to several petitions from the city and county of Philadelphia, and one petition from Bucks County calling for an increase in paper money… Governor Patrick Gordon was sympathetic to the measure, but… hesitated to offend the Board of Trade...

The 1728 Assembly subsequently agreed to Gordon's call for moderation and passed a bill emitting only £30,000 to be loaned at 5 percent interest. Nonetheless, the Assembly … delayed implementation of the measure for only four months, clearly not enough time for London to review and repeal the law before the emissions began.…

Two years later Gordon approved (re-issue of £40,000 of previously issued £45,000) the February 1731 reemission act, justifying his consent by insisting that approval was the "most prudent & politick Expedient to preserve that Peace & Happiness" the colony enjoyed ….

PATRICK GORDON1644 - 1736

PENNSYLVANIA DEFIES BOARD OF TRADE


“There is a certain proportionate Quantity of Money requisite to carry on the Trade of a Country freely and currently; More than which would be of no Advantage in Trade, and Less, if much less, exceedingly detrimental to it.”

“…we can never have too many People (nor too much Money) For when one Branch of Trade or Business is overstocked with Hands, there are the more to spare to be employed in another.”

“It is nothing to the Purpose to object the wretched Fall of the Bills in New-England and South-Carolina, unless it might be made evident that their Currency was emitted with the same Prudence, and on such good Security as ours is; and it certainly was not.”

BENJAMIN FRANKLIN – ‘FATHER OF PAPER MONEY’ “A Modest Enquiry into the Nature and Necessity of a Paper-Currency”

Philadelphia, April 3, 1729


“Some of our plantations, have severely felt the ill effects of those weak, unjust and disruptive measures, of increasing the quantities of bills; while the Philadelphians by keeping sacredly to a certain number or sum total of bills, have not only preserved their credit amongst themselves; but even extended it, to some of the neighbouring provinces; where,, I am informed, a Philadelphian bill will fetch more than one of their own…” An Essay Upon Money and Coins, by Joseph Harris

Joseph Harris, 1757

PENNSYLVANIA’S MONEY HELD IN HIGH REGARD IN ENGLAND

PART 3

A Different Story: Massachusetts Deflated


“Colonial governors were ordered to sign no more laws authorizing Bills of Credit;the outstanding Bills of Credit were ordered to be withdrawn;the taxes were ordered to be paid in coins;

… When in 1727 Gov. Dummer refused to sign an authorization for £50,000 of new bills to help pay off £100,000 of old bills, the House of Assembly declared that THEY CONSIDERED THEIR LIBERTIES THREATENED. The Governor’s reply to this note of alarm was to force the House in 1728 to further contract the currency.”

The History of Money in America, Alexander del Mar, p. 80

“… the government of England … commenced in 1727 that series of repressive measures which furnished the first distinctive provocation to the American Revolution.” Alexander Del Mar

GOVERNOR WILLIAM DUMMER1677 - 1761


“The notes … were to be paid off from the proceeds of new and additional taxation …

In 1737 the provincial notes had been reduced to not much over the £30,000 limit …

In 1735 … money was so scarce that the inhabitants could not, even when threatened with a forced sale of their goods, pay their taxes, except in commodities; and the governor reluctantly accepting the situation, agreed to receive the taxes in hemp, flax and bar-iron.”


”In 1730, Gov. Belcher was appointed by the Crown with imperative orders to go on with the contraction until the note currency was reduced to £30,000.” Alexander Del Mar

Jonathan Belcher (1681 – 1757)Mass. Gov. (1730 – 1741)


“The Colonial government … was ordered … to demand payment in coins for taxes and dues at par. This operation was commenced in 1750 … The result was a complete revulsion of fortune among every class of American.The favored official or lucky adventurer became rich, the industrious trader was impoverished, the creditor was lifted up, the debtor was cast down; and every sort of injustice was committed under cover of law.”The History of Money in America, Alexander del Mar, p. 83

BY 1751, MASSACHUSETTS WAS SO DESPERATE THAT REVOLUTION WAS A REAL POSSIBILITY.

Colonial Seaport of Boston, Massachusetts


“On April 24, 1751, a bill had passed the Assembly authorizing the Treasurer to liquidate the current expenses of the Colony by the issue of interest-bearing certificates of indebtedness in denominations of £6 (afterwards £4) payable in one year.

To this bill the governor had yielded a reluctant consent …

… to the surprise of the governor and possibly also to that of the Assembly, these certificates circulated freely among the people as money.”


AT THIS POINT, THE ROYAL GOVERNMENT MADE A CONCESSION:TO HAVE REFUSED TO MAKE IT, WOULD HAVE PRECIPATATED THE REVOLUTION AT ONCE.

BOSTON, MASS.

The Treasury certificates continued tocirculate as money, with at least £157,000 still outstanding in 1766.

PART 4

1741 No “Partial Schemes of Private Men”

1741 No “Partial Schemes of Private Men”

After the disastrous 1764 legislation, eight Philadelphia mercantile houses attempted to issue £30,000 in short term (9 month) interest bearing notes.

Immediately two hundred other merchants advertised in December 11 Pennsylvania Gazette that they would not accept these notes under any conditions.

A complaint sent to the Pennsylvania General Assembly “argued that the right to strike money of any kind belonged to the legislature alone and that the ‘partial schemes of private men’ would only undermine the general welfare.” LOST SCIENCE OF MONEY, p. 376

1741 – LORDS OF TRADE FORBID ALL PRIVATE MONEYTHE PRIVATE MONEY GANG IN LONDON SUPPRESSED COLONIAL IMITATORS

THE COLONISTS WERE IN FULL AGREEMENT

ROBERTMORRIS,OF THE FIRMWILLING &MORRIS,PHILADELPHIA

ROBERT MORRIS WAS PART OF THE FIRM,WILLING & MORRIS, WHEN IT ATTEMPTEDTO ISSUE PRIVATE NOTES.

PART 5

1751 & 1764 Currency Acts

The Act restricted New England colonies from creating paper money (Mass, RI, NH and Conn).

• Future issuance of bills of credit could not be used to pay private debts, but to pay public debts only (exchequer bills) -- “only to fund the military in time of war and invasion or in service of government”.

• Any new paper bills had to be secured with tax revenues and retired within two years from the date issued.

• Existing bills could not be used beyond their redemption period.

1751 & 1764 CURRENCY ACTS

THE 1751 CURRENCY ACT

HOUSE OF COMMONSLONDON, ENGLAND

BOSTON, MASS.

1751 & 1764 CURRENCY ACTS

The ACT didn’t ban paper money for government expenses, but banned it as legal tender in private transactions, and made the ban retroactive for ten years, applying it to any money issued since 1754! It thus sharply contracted the circulation, harming trade.

Franklin went to London to lobby for its repeal.

THE 1764 CURRENCY ACT WAS ENFORCED BY ENGLAND IN ALL COLONIES!

PART 6

The Monetary Cause of the Revolution


“But the narrow-minded and selfish London merchants and bankers, who influenced the government at this period, would not permit the colonies to have their own monetary system; they must accept such ‘national’ coins as the London merchants choosed to lend them; as though there was anything ‘national’ about coins which were manufactured at their own (the merchants’) private behest and could be withdrawn, melted or exported at their own pleasure. Accordingly orders were sent to America to put down the Colonial money … it was the enforcement of this policy that brought on the Revolution …The History of Money in America, Alexander del Mar, p. 69

MORE THAN ANYTHING ELSE IT WAS THE LORDS OF TRADE’S MONETARY SUPPRESSIONSTHAT LED TO THE REVOLUTION

March 5, 1770 – BOSTON MASSACRE


COMMODITY MONEY ADVOCATES ALSO ADMITTED THE ISSUE OF PAPER MONEY ISSUANCE WAS A GREAT CAUSE OF THE REVOLUTION

“In colony after colony, party lines came to be drawn upon this sole issue; and when opposition was encountered from the governors or councils, deadlocks frequently ensured. Public disturbances were often aroused by these controversies over paper money, and a factional and disorderly spirit was engendered.” p. 46“… as a matter of simple historical fact, there can be little doubt that the acts of 1751 and 1764, which suppressed further issues of bills of credit, contributed not a little to the final breach with the mother country.” p. 57Charles J. Bullock, Essays on the Monetary History of the United States

English soldiers search a settler's house (1770s)


“The action finally taken by Great Britain aroused the most bitter feelings of resentment; and the {Currency} law of 1764 was enacted at a time when the minds of Americans were excited over the Stamp Act … “ p. 58

“In 1766, when he was examined before the House of Commons, Franklin gave it as his deliberate opinion that one reason for the impatience and disrespect which the colonies were manifesting toward Parliamentary authority was ‘the prohibition of making paper money.’ Too little attention has been given to this fact by most American historians.” p. 58Charles J. Bullock, Essays on the Monetary History of the United States



By 1773 London reconsidered, and allowed colonial legislatures more leeway in issuing various forms of paper money. But it was too little, too late; the colonists ‘rejected any parliamentary interference with their control over money,’ wrote Ernst. (Joseph Ernst, Money and Politics in America 1755-1775, chapter 1)


Massachusetts Spy (est. 1770) was constantly on the vergeof being suppressed by the Royalist government. Thecolumnists spoke to the colonists as an independentpeople tied to Britain only by voluntary legal compact.


Benjamin Franklin’s cartoon warned against the danger of Britain losing herAmerican colonies by showing a woman with her limbs (American states) cut off.

PART 7

Continental Currency – Lifeblood of the Revolution


The Second Continental Congress met at Philadelphia on May 10, 1775.

On June 22 the Congress issued $2 million in bills of credit – Continental Currency –based upon credit of the States, who would redeem the bills.

“But, although the Colonies were as yet uncertain of their course with respect to separation, there was no uncertainty with regard to their monetary system. This they had determined should be independent of the Crown …” The History of Money in America, Alexander del Mar, p. 96

CONTINENTAL CURRENCY AND THE REVOLUTION WERE INSEPARABLE!

Second Continental Congress, 1775, Philadelphia


The Continental Congress issued the Declaration of Independence in July 1776.

They also issued a proclamation that anyone refusing to accept the Continental Currency was a public enemy and could be imprisoned and their possessions seized.



“Lexington and Concord were trivial acts of resistance which chiefly concerned those who took part in them and which might have been forgiven; but the creation and circulation of bills of credit by revolutionary assemblies in Massachusetts and Philadelphia, were the acts of whole people and coming as they did upon the heels of the strenuous efforts made by the Crown to suppress paper money in America, they constituted acts of defiance so contemptuous and insulting to the Crown that forgiveness was thereafter impossible.”




“The currency made the revolution possible, and was finally brought down largely by British counterfeiting.”Stephen Zarlenga, Lost Science of Money, p. 379

CONTINENTAL CURRENCY HAS BEEN VILIFIED AND RIDICULEDBY THOSE WHO MIS-READ HISTORY AND SUPPORT PRIVATE MONEY

COUNTERFEITING WAS DONEABOARD BRITISH WARSHIPS IN NY HARBOR

PART 8

Limitations of the Continental Currency


In December, 1775, the following types of money were in circulation in the colonies:

Continental bills 6.0 million $Colonial bills 3.8 million $Gold & silver coin 9.2 million $ TOTAL 19.0 million

Almost half of the money was coin.

THE CONTINENTAL’S POWER WAS LIMITED BY SEVERAL IMPORTANT FACTORS:#1 ENGLISH MONEY SYSTEM OF GOLD AND SILVER COINS WAS NOT ELIMINATED

GEORGE III GOLD COIN


“Perhaps in all history there never was a body at once so powerful and so helpless as this one. It exercised all the powers of national sovereignty, and yet never collected a dollar of taxes in its own right. It accredited its ministers to foreign countries, and received ambassadors in return; but would have trembled to appoint a tax collector in Rhode Island or Delaware. It created armies, emitted money, made foreign loans, yet had no certain resources upon which to base any of these acts. In a word, it was at once a sovereign and a mendicant.”The History of Money in America, Alexander del Mar, p. 97

#2 CONGRESS HAD NO STATUTORY POWER TO CREATE LEGAL TENDER MONEY OR LEVY TAXES:IT COULD NOT REDEEM ITS NOTES IN TAXES


Money Supply at the close of 1776:

Continental bills $25,500,000Colonial bills (all prev issued) 7,721,855Continental loan certificates 5,000,000Private bank notes ?Coins 6,778,145Counterfeits ? -------------- TOTAL $45,000,000

#3 THE INDIVIDUAL STATES RETAINED THEIR LEGAL TENDER POWERS#4 CONTINENTAL CURRENCY HAD NO HIGHER RANK THAN THE 11 PAPER CURRENCIES

STILL ISSUED BY THE 11 INDIVIDUAL COLONIES/STATES

Colonial Bills of Credit emitted in 1776:

Mass $333,333Rhode Island 300,000Connecticut 366,300New York 637,500New Jersey 133,000Pennsylvania 227,000Maryland 415,111Virginia 1,500,000South C. ------?------- TOTAL $3,912,244


From 1775 to 1783, the states issues were as follows:Mass $3,868,000Conn 1,516,500New Jersey 1,618,000Delaware 146,500Virginia 128,441,000S.Carolina 33,458,926Rhode Island 714,000New York 1,161,250Penn 4,325,000Maryland 950,000N. Carolina 33,325,000 --------------- TOTAL $209,524,776

#5 After the decline in value of the Continental, Congress fixed a limit on emission; but there were no limits to the emissions of the States

NEW JERSEY BILL OF CREDIT – MARCH 25, 1776

PART 9

Massive British Counterfeiting of the Continentals


BENJAMIN FRANKLIN’S DESCRIPTION OF THE BRITISH COUNTERFEITING

BENJAMIN FRANKLIN(1706 – 1790)


BRITISH PROPAGANDA WITH COUNTERFEIT CONTINENTALS

The Successful British Counterfeiting of American Paper MoneyDuring the American Revolution, Eric P. Newman


“The particular act of meanness which I allude to in this description, is forgery. You, sir, have abetted and patronized the forging and uttering counterfeit continental bills. In the same New York newspapers in which your own proclamation under your master's authority was published, offering, or pretending to offer, pardon and protection to these states, there were repeated advertisements of counterfeit money for sale, and persons who have come officially from you, and under the sanction of your flag, have been taken up in attempting to put them off.”

Thomas Paine – The American Crisis (1780-83) Chapter V – To General Sir William Howe

BRITISH COUNTERFEIT

THOMAS PAINE’S LETTER TO SIR WILLIAM HOWE

SIR WILLIAM HOWE(1729 – 1814)


“This counterfeiting shows the British establishment’s understanding of how excessive quantity can destroy a money system, contrary to their claims that the Bank of England’s issues could not affect prices.”Stephen Zarlenga, Lost Science of Money, p. 381

HOW MONEY WORKS

COUNTERFEIT MONEY

BRITISH CONTERFEITING WAS EXTENSIVE & SUCCESSFUL


The Successful British Counterfeiting of American Paper MoneyDuring the American Revolution, Eric P. Newman

BRITISH COLONIAL NEW YORKwhere counterfeiting occurred onboard British warships

In 1779, depreciation of the Continentals became very marked:

Jan 14 8 to 1Feb 3 10 April 2 17 May 5 24June 4 20Sept 17 24Oct 14 30Nov 17 38 ½

Financial History of the United States,Davis Rich Dewey, p. 39

BRITISH CONTERFEITING’S AFFECTS IN 1779


No one knows how manyContinentals were counterfeited…

PART 10

Breakdown of the Continental Currency


7/9/1778 Article of Confederation ratified

9/1/1779 Confederation authorized

upper limit of $200 million issued;

no more were printed after 1779.

NUMBER OF AUTHORIZED ISSUES OF CONTINENTALS

YEAR #ISSUES AMOUNT1775 3 $ 6,000,0001776 4 19,000,0001777 5 13,000,000 1778 14 63,500,300 1779 14 140,052,480TOTAL 40 $ 241,552,780

Between 6/22/1775 and 11/29/1779,a period of 4 ½ years, the amount above was not in circulation, since from the beginning there was some small redemption.


7/9/1778 Article of Confederation ratified

9/1/1779 Confederation authorized

upper limit of $200 million issued;

no more were printed after 1779.

NUMBER OF AUTHORIZED ISSUES OF CONTINENTALS

THE $200 MILLION LIMIT WAS NOT EXCEEDED.THE U.S. GOVERNMENT HAS A NEAR PERFECT RECORDIN THIS REGARD. IT HAS ALMOST NEVER CREATEDUNAUTHORIZED MONEY, AND OFTEN HAS NOT EVENCREATED AS MUCH AS WAS AUTHORIZED.


The Continentals had carried the Nation through six years of the Revolution, to within just 5 months of its successful conclusion…from then on, the campaign was carried on in coinage, with French help.

NUMBER OF OTHER PAPER MONEY ISSUES

TYPE AMOUNTBritish Counterfeits 200,000,000+ ?Individual States $ 209,524,776

*Starting October 1777, states beganrestricting the Continentals legal tender status.

*In 1778 Congress asked the states to stop issuing their own notes but only DEl and MD complied.


1775 FIRST ISSUE177617771778/Mar 1.75 for 11779/Mar 181780/Mar 401781/Jan 1001781/May 500 to 1000“ceased as currency”

THE DEPRECIATION OF THE CONTINENTALS

“I know it must be extremely difficult to make foreigners understand the nature and circumstances of our paper money, because there are natives who do not understand it themselves... Every stone in the bridge, that has carried us over, seems to have a claim upon our esteem. But this was a corner-stone, and its usefulness cannot be forgotten… almost every man is sensible of the effect…

The paper currency was issued for the express purpose of carrying on the war. It has performed that service, without any other material change to the public, while it lasted. But to suppose, as some did, that at the end of the war, it was to grow into gold and silver, or become equal thereto, was to suppose that we were to get two hundred millions of dollars by going to war, instead of paying the cost of carrying it on.”

PART 11

The French Factor in the Revolution


Louis XVI, who did not want to break openly with Britain, allowed Beaumarchais to found a commercial enterprise, supported by the French and Spanish crowns, that supplied the American rebels with weapons, munitions, clothes and provisions, all of which would never be paid for. This policy came to fruition in 1777 when Burgoyne’s army capitulated at Saratoga to a rebel force largely clothed and armed by the supplies Beaumarchais had been sending.

EARLY SUPPORT OF FRENCH AND SPANISH CROWNS

Pierre-Augustin Caron de Beaumarchais(1732-1799) - early supporter of American Revolution


“The service of France to the United States is not, however, to be measured by the direct money payment, for it is estimated that she spent $6,000,000 for the French army and navy in the American cause.”Financial History of the United States, Davis Rich Dewey, p. 48

1778 – FRANCE WAS THE FIRST COUNTRY TO RECOGNIZE THE UNITED STATES

YEAR FRENCH SUBSIDY (GIFT) FRENCH LOAN SPANISH LOAN HOLLAND LOAN

1777 499,125 181,500

1778 544,500

1779 181,500

1780 726,000

1781 1,497,375 1,737,763 128,804

1782 1,892,237 45,213 720,000

1783 1,089,000 584,000

TOTAL ($) 1,996,500 6,352,500 174,017 1,304,000


1781 – BATTLE OF THE CHESAPEAKE

A crucial naval battle that took place near the mouth of Chesapeake Bay, between a British fleet and a French fleet.

The battle was strategically a major defeat for the British, since it prevented the Royal Navy from reinforcing or evacuating the blockaded forces of Lieutenant General Lord Cornwallis at Yorktown, VA.


TOTAL COST OF WAR

Millions of DollarsFRENCH GOV 256,000,000AMERICAN 170,000,000BRITISH 500,000,000

French law professor and politician Edouard Laboulayecommented in 1865: any monument raised to Americanindependence would properly be a joint projectof the French and American peoples.

PART 12

The Darkest Hour of the Revolution


• Only $151,666 in gold and silver, needed for foreign purchases, had been received by the treasury in 1778 and 1779

• Congressional assembly of 1780 besieged with petitions for tax exemptions -- THOMAS PAINE: “A declaration to have stood forth with their lives and fortunes, and a reprobation of every thought of partial indulgence would have sounded much better than petitions.”

A letter arrived from General Washington to the General Assembly of Pennsylvania, warning of mutiny at any moment. Tom Paine (Clerk of the House) recounted:

“When the letter was read I observed a despairing silence in the House. Nobody spoke for a considerable time. At length a member whose fortitude to withstand misfortunes I had a high opinion of, rose: If, said he, ‘the account in that letter is a true state of things,… it appears to me in vain to contend the matter any longer. We may as well give up at first as at last.’ “

JUNE 1780: THE TREASURY MONEY-LESS AND GOVERNMENT CREDIT-LESS

THOMAS PAINE(1737 – 1809)


“If the assembly could not give the assistance … it was very proper the matter should be known by those who either could or would endeavor to do it.

To conceal the information within the house … endangering the public cause.

The only thing that now remained, and was capable of reaching the case, was private credit, and the voluntary aid of individuals; … I drew out the salary due to me as clerk, enclosed five hundred dollars to a gentleman in this city, in part of the whole, and wrote fully to him on the subject of our affairs… I REQUESTED Mr. McLeneghan, to propose a voluntary subscription among his friends.”

Dissertation on Government, the Affairs of the Bank, and Paper Money, Thomas Paine

JUNE 1780: THE TREASURY MONEY-LESS AND GOVERNMENT CREDIT-LESS

There is no national monument dedicatedto Thomas Paine, and the resting place of hisbones is still unknown.


Mr. McLeneghan communicated the letter at a coffee house. He and Mr. Robert Morris donated £200 each in coinage, and eventually others contributed £1,360 in Continentals at the City Tavern. They formed the fund into a bank called the Pennsylvania Bank.

By means of this bank, the army was supplied through the campaign and recruited and maintained its ground.

PENNSYLVANIA BANK

Philadelphia's City Tavern opened in 1773 and quickly became an important meeting place for merchants and other prominent citizens, including those who decided that Philadelphia would host the First Contintental Congress in 1774.


Feb.: Congress appoints Robert Morris to post of Superintendent of Finance

May: Morris’ plan for establishing Bank of North America passes by 1 vote (subscriptions of Pennsylvania Bank transferred to Bank of NA)

Oct: French frigate arrives with $470,000 in coinage, immediately deposited into bank

Oct. 19: Cornwallis surrenders at Yorktown and Revolution is won

WINNING OF THE WAR, 1781

PART 13

All in All, A Remarkable Performance by the Continentals


1. the establishment of a national currency by a new Nation in wartime

2. needing to get eleven states to give up a large part of their sovereignty – the money power

3. counterfeiting by England4. necessity to fight a

revolutionary war against a great power

More?

THE WONDER OF THE CONTINENTAL MONEY


SAMUAL BRECK, pub. 1854, p. 3

THE CONTINENTALS’ IMPORTANCE HAS BEEN RECOGNIZED


“… THE WHOLE IS A MYSTERY EVEN TO THE POLITICIANS, HOW WE HAVE BEEN ABLE TO CONTINUE A WAR FOUR YEARS WITHOUT MONEY, AND HOW WE COULD PAY WITH PAPER THAT HAD NO PREVIOUSLY FIXED FUND APPROPRIATED SPECIFICALLY TO REDEEM IT.

THIS CURRENCY AS WE MANAGE IT IS A WONDER MACHINE…”

Writings, Benjamin Franklin, April 22, 1779 letter from France to Dr. Cooper, pp. 422-3

BENJAMIN FRANKLIN RECOGNIZED THE CONTINENTALS

PART 14

The Aftermath of the Continental Currency


“… the legal tender legislation… enabled the unprincipled debtor to pay his debts at an enormous discount” Samuel Breck

Franklin realized the injustice of depreciation to fixed pensioners and salaried persons. He proposed legislative remedies.

“In war or revolution, people would be hurt – many physically, and the lucky ones just financially. With hindsight, better provision could have been made to prevent… ” Stephen Zarlenga

THERE WAS A REALIZATION THATMANY PATRIOTS HAD BEEN HURT BY THE CONTINENTAL CURRENCY


“But to suppose, as some did, that at the end of the war, it was to grow into gold and silver, or become equal thereto, was to suppose that we were to get two hundred millions of dollars by going to war, instead of paying the cost of carrying it on…

Every stone in the bridge, that has carried us over, seems to have a claim upon our esteem. But this was a corner-stone, and its usefulness cannot be forgotten…”

Writings of Thomas Paine

THOMAS PAINE CAPTURED THE ESSENCE OF THE SITUATION:


Stephen Zarlenga, Lost Science of Money, p. 386

“For almost two centuries the field of colonial paper money has been miscast in terms of inflation and debasement by the influence of the English school. This misapprehension continues to the present day in spite of excellent works to the contrary, and the testimony of expert witnesses of the period such as Franklin, Jefferson and Paine.But there was one good effect of the mother’s monetary repression – it precipitated the revolution and led to the founding of the United States.

TO SUMMARIZE

Q & A

WILL DECKER’S CONCLUSION:

THE CONTROL OF MONEY -- WITHOUT CONTROL FROM THE PUBLIC -- LEADS TOCORRUPTION … USURPATION … SLAVERY.

Documents

CHAPTER 14 – PART 2 U.S. COLONIAL MONEYS The Lost Science of Money COLONIAL BILL OF CREDIT, NEWBERN, N.C. CONTINENTAL BILL OF CREDIT, PHILADELPHIA, PA