Remarks and Facts Relative to the American Paper Money4
AD (first two MS pages missing): American Philosophical Society; printed in The Pennsylvania Chronicle, May 25–June 1, 1767; The Pennsylvania Gazette, June 4, 1767; and [Benjamin Vaughan, ed.,] Political, Miscellaneous, and Philosophical Pieces;... Written by Benj. Franklin, LL.D. and F.R.S. (London, 1779), pp. 206–21; fragment of rough draft: Library of Congress.5
During January and early February 1764 the Board of Trade had held several discussions about recommending an extension to all the colonies of the act of 1751 forbidding the New England colonies to issue bills of credit that should be legal tender. Merchants trading to America, the colonial agents, and several other experienced or interested individuals were given a chance to express their views. At the end the agents asked for time to consult their constituents in America, but the Board declined to grant such a delay. On Feb. 9, 1764, therefore, the Board signed a long representation to the King that, among other matters, set forth in detail its objections to legal-tender issues in the colonies and recommended the extension of the prohibition.6 The result was the passage, April 19, of the Currency Act of 1764. During subsequent years Franklin and Jackson, along with other colonial agents, were under strict orders to work for the repeal or significant modification of that act.
As the document following this one makes clear, some of the British merchants supported the agents’ efforts; to persuade them of their error the Board of Trade gave them a copy of that part of their representation of Feb. 9, 1764, which related to the currency question. At the merchants’ request Franklin then prepared and gave them this point-by-point reply to the Board’s arguments. He sent copies of both to Joseph Galloway, probably about the middle of March 1767 (below, pp. 123–4) together with another paper of his own on the same subject, believed to be the one printed above, pp. 32–9. Galloway, probably working in conjunction with William Franklin, arranged for the publication of the Board of Trade’s representation and Franklin’s reply in the Chronicle and the Gazette in Philadelphia. According to William, his father’s piece won “general Approbation” in Pennsylvania.7
London, March 11, 1767.
Remarks on the Report published in our last Chronicle. By B. F. Esq; 8
In the Report of the Board of Trade, dated February 9, 1764, the following Reasons are given for restraining the Emission of Paper Bills of Credit in America, as a legal Tender.
1. That it carries the Gold and Silver out of the Province, and so ruins the Country, as Experience has shewn in every Colony, where it has been practised in any great Degree.
2. That the Merchants trading to America have suffered and lost by it.
3. That the Restriction has had a beneficial Effect in New-England.
4. That every Medium of Trade should have an intrinsic Value, which Paper Money has not. Gold and Silver are therefore the fittest for this Medium, as they are an Equivalent, which Paper never can be.
5. That Debtors, in the Assemblies, make Paper Money with fraudulent Views.
6. That in the Middle Colonies, where the Credit of the Paper Money has been best supported, the Bills have never kept to the nominal Value in Circulation, but have constantly depreciated to a certain Degree whenever the Quantity has been increased.
To consider these Reasons in their Order. The first is, That Paper Money carries the Gold and Silver out of the Province, and so ruins the Country, as Experience has shewn in every Colony where it has been practised in any great Degree. This seems to be a mere speculative Opinion, not founded on Fact in any of the Colonies. The Truth is, that the Balance of their Trade with Britain being generally against them, the Gold and Silver is drawn out to pay that Balance; and then the Necessity of some Medium of Trade has induced the making of Paper Money, which could not be carried away. Thus, if carrying out all the Gold and Silver ruins a Country, every Colony was ruined before it made Paper Money. But, far from being ruined by it, the Colonies, that have made Use of Paper Money, have been and are all in a thriving Condition. Their Debt indeed to Britain has increased, because their Numbers, and of course, their Trade, has increased; for all Trade having always a Proportion of Debt outstanding, which is paid in its Turn, while fresh Debt is contracted, that Proportion of Debt naturally increases as the Trade increases; but the Improvement and Increase of Estates in the Colonies has been in a greater Proportion than their Debt. New-England, particularly, in 1696, about the Time they began the Use of Paper Money, had in all its four Provinces but 130 Churches or Congregations, in 1760 they were 530; the Number of Farms and Buildings is increased in Proportion to the Number of People, and the Goods exported to them from England in 1750, before the Restraints took Place, were near five Times as much as before they had Paper Money.9 Pennsylvania, before they made any Paper Money, was totally stript of its Gold and Silver, though they had from Time to Time, like the neighbouring Colonies, agreed to take Gold and Silver Coins at higher and higher nominal Values, in Hopes of drawing Money into, and retaining it for the internal Uses of the Province. During that weak Practice, Silver got up by Degrees to 8s. 9d. an Ounce, and English Crowns were called1 6, 7, and 8s. Pieces long before Paper Money was made. But this Practice of increasing the Denomination was found not to answer the End. The Balance of Trade carry’d2 out the Gold and Silver as fast as it was brought in, the Merchants raising the Price of their Goods in Proportion to the increas’d Denomination of the Money. The Difficulties for want of Cash were accordingly very great, the chief Part of the Trade being carry’d on by the extreamly inconvenient Method of Barter, when in 1723 Paper Money was first made there,3 which gave new Life to Business, promoted greatly the Settlement of new Lands, by lending small Sums to Beginners on easy Interest, to be repaid by Installments, whereby the Province has so greatly increas’d in Inhabitants, that the Export from hence thither is now more than tenfold what it then was, and by their Trade with foreign Colonies they have been able to obtain great Quantities of Gold and Silver to remit hither, in return for the Manufactures of this Country. New-York and New Jersey have also increas’d and improv’d greatly during the same Period, with the Use of Paper Money; so that it does not appear to be of the ruinous Nature ascrib’d to it. And if the Inhabitants of those Countries are glad to have the Use of Paper among themselves, that they may thereby be enabled to spare for Remittance hither the Gold and Silver they obtain by their Commerce with Foreigners, one would expect no Objection against their Parting with it could arise here in the Country that receives it.
The second reason is, That the Merchants trading to America have suffered and lost by the Paper Money. This may have been the Case in particular Instances at particular Times and Places, as in South-Carolina about 50 Years since, when the Colony was thought in danger of being destroy’d by the Indians and Spaniards; and the British Merchants, in fear of losing their whole Effects there, call’d precipitately for Remittances; and the Inhabitants to get something lodg’d in safer Countries, gave any Price in Paper Money for Bills of Exchange, whereby the Paper as compar’d with Bills or with Produce or other Effects fit for Exportation, was suddenly and greatly depreciated. The unsettled State of Government for a long Time in that Province had also its Share in depreciating its Bills. But since that Danger blew over, and the Colony has been in the Hands of the Crown, their Currency became fixed, and has so remain’d to this day. Also in New-England, when much greater Quantities were issued than was necessary for a Medium of Trade, to defray the Expedition against Louisbourg; and, during the last War, in Virginia and North Carolina, where great Sums were issued to pay the Colony Troops, and the War made Tobacco a poorer Remittance from the higher Price of Freight and Insurance: In these Cases the Merchants trading to those Colonies may sometimes have suffered by the sudden and unforeseen Rise of Exchange. By slow and gradual Rises they seldom suffer, the Goods being sold at proportional Prices. But War is a common Calamity in all Countries, and the Merchants that deal with them cannot expect to avoid a share of the Losses it sometimes occasions by affecting Publick Credit. It is hoped however, that the Profits of their subsequent Commerce with those Colonies may have made them some Reparation. And the Merchants trading to the Middle Colonies New York, New Jersey and Pensilvania, have never suffer’d by any Rise of Exchange, it having ever been a constant Rule there to consider British Debts as payable in Britain, and not to be discharged but by as much Paper (whatever might be the Rate of Exchange) as would purchase a Bill for the full Sterling Sum. On the contrary, the Merchants have been great Gainers by the Use of Paper Money in those Colonies, as it enabled them to vend much greater Quantities of Goods, and the Purchasers to pay more punctually for them. And the People there make no Complaint of any Injury done them by Paper Money with a legal Tender; they are sensible of its Benefits and petition to have it so allowed.
The 3d Reason is, That the Restriction has had a beneficial Effect in New England. Particular Circumstances in the New England Colonies made Paper Money less necessary and less convenient to them. They have great and valuable Fisheries of Whale and Cod, by which large Remittances can be made. They are four distinct Governments; but having much mutual Intercourse of Dealings, the Money of each us’d to pass currant in all: But the whole of this common Currency not being under one common Direction, was not so easily kept within due Bounds, the prudent Reserve of one Colony in its Emissions, being rendred useless by Excess in another. The Massachusetts therefore were not dissatisfied with the Restraint, as it restrain’d their Neighbours as well as themselves, and perhaps they do not desire to have the Act repealed: They have not yet felt much Inconvenience from it; as they were enabled to abolish their Paper Currency by a large Sum paid them in Silver from Britain, to reimburse them their Expence in taking Louisburgh; which with the Gold brought from Portugal by means of their Fish, kept them supply’d with a Currency till the late War furnish’d them and all America with Bills of Exchange, so that little Cash was needed for Remittance. Their Fisheries too, furnish them with Remittance thro’ Spain and Portugal to England which enables them the more easily to retain Gold and Silver in their Country. The Middle Colonies have not this Advantage, nor have they Tobacco, which in Virginia and Maryland answers the same Purpose. Where Colonies are so different in their Circumstances, a Regulation that is not inconvenient to one or a few may be very much so to the rest. But the Pay is now become so indifferent in New England, at least in some of its Provinces, through the Want of Currency, that the Trade thither is at present under great Discouragement.
The 4th. Reason is, That every Medium of Trade should have an intrinsic Value, which Paper Money has not. Gold and Silver are therefore the fittest for this Medium, as they are an Equivalent, which Paper never can be. However fit a particular Thing may be for a particular Purpose, wherever that Thing is not to be had, or not to be had in sufficient Quantity, it becomes necessary to use something else, the fittest that can be got, in lieu of it. Gold and Silver are not the Produce of North America, which has no Mines; and that which is brought thither cannot be kept there in sufficient Quantity for a Currency.4 Britain an independent great State, when its Inhabitants grow too fond of the expensive Luxuries of foreign Countries, that draw away its Money, can and frequently does make Laws to discourage or prohibit such Importations, and by that Means can retain its Cash. The Colonies are dependent Governments, and their People having naturally great Respect for the Sovereign Country, and being thence immoderately fond of its Modes, Manufactures and superfluities, cannot be restrain’d from purchasing them by any Province Law; because such Law, if made, would immediately be repeal’d here, as prejudicial to the Trade and Interest of Britain. It seems hard therefore to draw all their real Money from them, and then refuse them the poor Privilege of using Paper instead of it. Bank Bills and Banker’s Notes are daily used here as a Medium of Trade, and in large Dealings perhaps the greatest Part is transacted by their Means; and yet they have no intrinsic Value, but rest on the Credit of those that issue them, as Paper Bills in the Colonies do on the Credit of the respective Governments there. Their being payable in Cash upon Sight by the Drawers is indeed a Circumstance that cannot attend the Colony Bills for the Reason just above mentioned, their Cash being drawn from them by the British Trade; but the legal Tender being substituted in its Place, 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 his Money, finding, wherever he has occasion to lay out Money in the Province, a Person that is oblig’d to take the Bills. So that even out of the Province, the Knowledge that every Man within that Province is oblig’d to take its Money, gives the Bills a Credit among its Neighbours nearly equal to what they have at home. And were it not for the Laws here that restrain or prohibit as much as possible all losing Trades, the Cash of this Country would soon be exported; every Merchant who had occasion to remit it would run to the Bank with all its Bills that came into his Hands, and take out his Part of its Treasure for that purpose, so that in a short time it would be no more able to pay Bills in Money upon Sight than it is now in the Power of a Colony Treasury so to do. And if Government afterwards should have Occasion for the Credit of the Bank, it must of Necessity make its Bills a legal Tender, funding them however on Taxes by which they may in time be paid off, as has been the general Practice in the Colonies. At this very Time, even the Silver Money in England is oblig’d to the legal Tender for 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, by Wearing, become 5, 10, 20, and some of the Sixpences even 50 per Cent too light. For this Difference between the real and the 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 re-pass’d for the same Value, that makes three penny-worth of Silver pass for Six pence. Gold and Silver have undoubtedly some Properties that give them a Fitness above Paper as a Medium of Exchange; particularly their universal Estimation; especially in Cases where a Country has Occasion to carry its Money abroad, either as a Stock to trade with, or to purchase Allies and foreign Succours; otherwise that very universal Estimation is an Inconvenience which Paper Money is free from, since it tends to deprive a Country of even the Quantity of Currency that should be retain’d as a necessary Instrument of its internal Commerce; and obliges it to be continually on its Guard in making and executing at a great Expence the Laws that are to prevent the Trade which exports it. Paper Money well funded has another great Advantage over Gold and Silver, its Lightness of Carriage, and the little Room that is occupied by a great Sum, whereby it is capable of being more easily, and more safely because more privately, convey’d from Place to Place. Gold and Silver are not intrinsically of equal Value with Iron, a Metal in itself capable of many more beneficial Uses to Mankind. Their Value rests chiefly in the Estimation they happen to be in among the Generality of Nations, and the Credit given to the Opinion that that Estimation will continue. Otherwise a Pound of Gold would not be a real Equivalent for even a Bushel of Wheat. Any other well-founded Credit is as much an Equivalent as Gold and Silver, and in some Cases more so, or it would not be preferd by commercial People in different Countries. Not to mention again our own Bank Bills, Holland, which understands the Value of Cash as well as any People in the World, would never part with Gold and Silver for Credit (as they do when they put it into their Bank from whence little of it is ever afterwards drawn out) if they did not think and find the Credit a full Equivalent.
The 5th Reason is, That Debtors in the Assemblies make Paper Money with fraudulent Views. This is often said by the Adversaries of Paper Money, and if it has been the Case in any particular Colony, that Colony should, on proof of the Fact, be duly punish’d. This however would be no Reason for punishing other Colonies who have not so abused their legislative Powers. To deprive all the Colonies of the Convenience of Paper Money, because it has been charg’d on some of them, that they have made it an Instrument of Fraud, is as if all the India Bank and other Stocks and Trading Companies were to be abolish’d, because there have been once in an Age Missisipi and South Sea Schemes and Bubbles.
The 6th. and last Reason is, That in the Middle Colonies, where the Paper Money has been best supported, the Bills have never kept to their nominal Value in Circulation, but have constantly depreciated to a certain Degree whenever the Quantity has been increased. If the Rising of the Value of any particular Commodity wanted for Exportation, is to be considered as a Depreciation of the Values of whatever remains in the Country, then the Rising of Silver above Paper, to that Height of additional Value which its Capability of Exportation only gave it, may be called a Depreciation of the Paper. Even here as Bullion has been wanted or not wanted for Exportation, its Price has varied from 5s. 2d. to 5s. 8d. per Ounce. This is near 10 per Cent; but was it ever said or thought on such an Occasion, that all the Bank Bills, and all the coin’d Silver and all the Gold in the Kingdom were depreciated 10 per Cent? Coin’d Silver is now wanted here for Change, and One per Cent is given for it by some Bankers; are Gold and Bank Notes therefore depreciated 1 per Cent? The Fact in the Middle Colonies is really this. On the Emission of the first Paper Money, a Difference soon arose between that and Silver, the latter having a Property the former had not, a Property always in Demand in the Colonies, to wit, its being fit for a Remittance. This Property having soon found its Value, by the Merchants bidding on one another for it, and a Dollar thereby coming to be rated at 8 shillings in Paper Money of New York, and at 7s. 6d. in Paper of Pensilvania, it has continued uniformly at those Rates in both Provinces now near 40 Years, without any Variation upon New Emissions; tho’ in Pensilvania the Paper Currency has at Times increas’d from £15,000 the first Sum, to £600,000 and in New York from £40,000 to £600,000 or near it. Nor has any Alteration been occasioned by the Paper Money in the Price of the Necessaries of Life when compar’d with Silver: they have been for the greatest Part of the Time no higher than before it was emitted, varying only by Plenty and Scarcity according to the Seasons, or by a less or greater foreign Demand. It has indeed been usual with the Adversaries of a Paper Currency, to call every Rise of Exchange with London, a Depreciation of the Paper: But this Notion appears to be by no means just: For if the Paper purchases every thing but Bills of Exchange at the former Rates, and those Bills are not above 1/10th. of what it is employ’d to purchase, then it may be more properly and truly said that the Exchange has risen, than that the Paper has depreciated. And as a Proof of this, it is a certain Fact, that whenever in those Colonies Bills of Exchange have been dearer, the Purchaser has constantly been obliged to give more in Silver as well as in Paper, for them, the Silver having gone hand in hand with the Paper at the Rate above-mentioned: And therefore it might as well have been said that the Silver was depreciated.
There have been several different Schemes for furnishing the Colonies with Paper Money, that should not be a legal Tender, viz.5
1. To form a Bank, in Imitation of the Bank of England, with a sufficient Stock of Cash to pay the Bills on Sight.
This has been often propos’d, but appears impracticable under the present Circumstances of the Colony Trade, which as is said above, draws all their Cash to Britain, and would soon strip the Bank.
2. To raise a Fund by some Yearly Tax, securely lodg’d in the Bank of England as it arises, which should during the Term of Years for which the Paper Bills are to be current accumulate to a Sum sufficient to discharge them all at their original Value.
This has been try’d in Maryland, and the Bills so funded were issued without being made a general legal Tender. The Event was, that as Notes payable in Time are naturally subject to a Discount proportion’d to the Time, so these Bills fell at the Beginning of the Term so low, as that Twenty Pounds of them became worth no more than Twelve Pounds in the Bills of Pensilvania the next neighbouring Province, though both had been struck near the same time at the same nominal Value but the latter was supported by the general legal Tender. The Maryland Bills however began to rise as the Term shortned, and towards the End recover’d their full Value. But as a depreciating Currency injures Creditors, this injur’d Debtors; and by its continually changing Value appears unfit for the Purpose of Money, which should be as fix’d as possible in its own Value, because it is to be the Measure of the Value of other Things.
3. To make the Bills carry an Interest sufficient to support their Value.
This too has been try’d in some of the New-England Colonies; but great Inconveniences were found to attend it. The Bills to fit them for a Currency are made of various Denominations and some very low, for the sake of Change; there are of them from £10 down to 3d. When they first come abroad, they pass easily and answer the purpose well enough for a few months; but as soon as the Interest becomes worth computing, the Calculation of it on every little Bill in a Sum, between the Dealer and his Customers in Shops, Warehouses and Markets, takes up much Time to the great Hindrance of Business. This Evil however soon gave place to a worse; for the Bills were in a short time gather’d up and hoarded, it being a very tempting Advantage to have Money bearing Interest, and the Principal all the while in a Man’s Power, ready for Bargains that may offer, which Money out on Mortgage is not. By this Means Numbers of People became Usurers with small Sums, who could not have found Persons to take such Sums of them upon Interest, giving good Security; and would therefore not have thought of it, but would have employ’d the Money in some Business, if it had been Money of the common kind. Thus Trade, instead of being increas’d by such Bills, is diminished; and by their being shut up in Chests the very End of making them, viz. to furnish a Medium of Commerce, is in a great Measure if not totally defeated.
On the whole, no Method has hitherto been found to establish a Medium of Trade in lieu of Money, equal in all its Advantages to Bills of Credit funded on sufficient Taxes for discharging it, or on Land Security of double the Value for Repaying it at the End of the Term, and in the mean time made a general legal Tender. The Experience of now near Half a Century in the Middle Colonies has convinc’d them of it among themselves, by the great Increase of their Settlements, Numbers, Buildings, Improvements, Agriculture, Shipping and Commerce. And the same Experience has satisfy’d the British Merchants who trade thither, that it has been greatly useful to them, and not in a single Instance prejudicial.
It is therefore hoped, that Securing the full Discharge of British Debts which are payable here, and in all Justice and Reason ought to be fully discharg’d here in Sterling Money, the Restraint on the legal Tender within the Colonies will be taken off, at least for those Colonies that desire it, and where the Merchants trading to them make no Objection to it.
4. This title appears in print first in Benjamin Vaughn’s edition of BF’s writings in 1779, and has been regularly used by later editors. Whether BF himself devised the title is unknown.
5. The missing pages of the surviving ms in BF’s hand represent approximately 15 percent of the whole. Their contents have been supplied from the earliest printed text, that in Pa. Chron., and the point at which the ms begins is noted. The fragment of rough draft represents nearly all of BF’s comment on the Board of Trade’s fourth reason for opposing colonial legal-tender paper money, but the passage underwent very substantial change and development before BF had finished the paper.
6. Board of Trade Journal, 1764–67, pp. 3, 4, 6, 8, 11, 14, 15, 18, 19. The pertinent parts of the representation are printed in Acts Privy Coun., Col., IV, 623–31. Very nearly the same parts formed the extract that BF sent to Galloway and that was printed in Pa. Chron., May 18–25, 1767, and Pa. Gaz., May 28, 1767.
8. The date line and heading are from the Pa. Chron. printing; the date line appears there at the end of the paper, but is here transferred to the top in accordance with the editorial practice of this edition. The surviving pages of BF’s MS carry no date.
9. BF got most, if not all, of these figures from Ezra Stiles, A Discourse on the Christian Union (Boston, 1761); see above, X, 248, 266–7.
1. A note printed in the issues of Pa. Chron. and Pa. Gaz., one week after the appearance of this document, listed four errors made “In the Hurry of transcribing.” The first of these was the omission of “called” at this point. The other mistakes occurred in parts of the document not reprinted here from the Chronicle, but taken from BF’s surviving autograph version; hence it is unnecessary to list them.
2. The first surviving page (numbered “3”) of BF’s autograph version begins with the “ry’d” of this word “carry’d.” The remainder of the paper is printed from this MS.
3. On the early history of paper money in Pennsylvania, and BF’s participation in the debate concerning it, see above, I, 139–57.