The Money Supply of the American Colonies before 1720

The Money Supply of the American Colonies before 1720

The Money Supply of the American Colonies before 1720

The Money Supply of the American Colonies before 1720

Excerpt

One need not apologize for presenting at this time a study of currency--even though it pertains to the past of two centuries ago. In this day of monetary upheaval--of the abandonment of the gold standard and of experiments with a "managed currency"-- it ought to be interesting to examine the history of the vexing questions of currency which affect directly the well-being of every individual. The colonial period of American history is particularly instructive in this connection. Those early days witnessed the introduction of the idea of "lawful money" of the country and the origin of the dollar as the unit of value. They witnessed also the beginnings of paper currency and the establishment of the principle of redeemability of paper in specie. Likewise, to colonial times must be traced the American tendency toward unit banking under state auspices. During the first hundred and fifty years of American experience, most legislation pertaining to currency was provided by the individual colonial governments rather than by the general government at Westminster. This early precedent of state action has placed a strong imprint upon later monetary policy, and survives, perhaps, in the present American banking system, which allows two thirds of the country's banks to remain under state rather than federal control.

A study of currency is assuredly basic for a survey of the economic history of any period. Since the material well-being of communities is indicated by prices, incomes, and the like, these fundamental facts must be ascertained by the measurement of monetary values. The understanding of the currency is especially important for colonial times. Every colony resorted to several sorts of money, of varying intrinsic values. Current prices in one colony--as judged by the purchasing power of money in relation to commodities--were not equivalent with identical prices in other colonies. Consequently, it is necessary that all the American currency expressions be reduced to one common standard; that some measure of value be ascertained which will enable the economic . . .

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