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1690 – Massachusetts authorized the first official paper currency to be ever used in the Western Hemisphere.
Until 1690, the North American colonies had dealt primarily in coinage. Silver and gold were rather rare, so colonists generally used unofficial coins, or “decrepit coppers.” Boston-based silversmiths John Hull and Robert Sanderson did operate their own mint between 1652 and 1682, issuing silver shillings and three and sixpence pieces, but save for a few ill-fated experiments, paper money was hardly tried or used.
Faced with an immediate need to pay expenses relating to a military action against Canada during King William’s War, on December 10, 1690 the General Court authorized the issuing of £7,000 in public paper currency. This was the first public paper money issued in the history of Western civilization. Previously all currency had an intrinsic value of gold, silver or copper, much like the value of commodity items used for bartering. Now for the first time, the money itself had no intrinsic value other than the value of the paper on which it was printed. Rather, the value of the money came from the fact that it was backed by the colony.
It was legislated as being equivalent to the denomination printed on the bill and would be accepted as the equivalent of hard currency by the colony. Within a few months it was further legislated that the paper money would be accepted by the government for tax payments at a 5% premium and that on demand bills could be turned into the treasury for the equivalent in hard currency, if the colony had such hard currency available.
At first Massachusetts notes were accepted at par with specie, which was predominately the Spanish American silver 8 reales, called a Spanish “dollar” by the colonists. In Massachusetts the Spanish dollar was valued at 6 shillings. In 1690 for every 6s of paper money one could obtain a Spanish silver dollar. As more paper money was put into circulation individuals would no longer accept the paper as equal to specie. Thus began the usual problem of paper currency, or fiat money, inflation, and the usual response, revaluation, and all in response to the usual cause, the need to pay for a war.
By 1737 so much paper money was in circulation it took 22s6d (22 shillings, 6 pence) in paper money to equal a Spanish dollar. To rectify this problem the Commonwealth decided to revalue its paper money.
Starting with the issue of February 4, 1737 Massachusetts introduced a new series of notes, called New Tenor money, that was legislated to have three times the value of equivalent denomination notes from earlier emissions. However, as more notes were printed inflation continued and the value of both types of notes continued to drop. Once again, another adjustment to the currency was legislated.
For the issue of January 15, 1742 the notes were to have four times the value of equivalent denomination notes from Old Tenor emissions. At this time the emissions from 1737-1740 became known as Middle Tenor or Three Fold Tenor, while the 1742 and later emissions became known as New Tenor (or four fold Tenor). In effect Massachusetts had three different types of currency circulating at once; in 1742 a Spanish dollar was valued at 24s9d in Old Tenor bills, 8s3d in Middle Tenor bills or 6s2d in New Tenor notes. Unfortunately inflation continued so that by 1749 a Spanish dollar was valued at 45s in Old tenor bills, 15s in Middle tenor bills or 11s3d in New Tenor notes.
As individuals might make a purchase using all three varieties it was essential for merchants to know the current inflation rates and to keep a conversion chart handy (various charts were printed for this purpose)!
The real resolution finally came in 1751 with the mandatory redemption of all notes and a return to hard money. There would be no further emission of paper in Massachusetts until the “Soldier’s notes” emission of May 25, 1775 printed by Paul Revere to pay the soldiers who were soon to fight at the Battle of Bunker Hill on June 16th.
https://thisdayinusmilhist.wordpress.com/2014/02/03/february-3/
Until 1690, the North American colonies had dealt primarily in coinage. Silver and gold were rather rare, so colonists generally used unofficial coins, or “decrepit coppers.” Boston-based silversmiths John Hull and Robert Sanderson did operate their own mint between 1652 and 1682, issuing silver shillings and three and sixpence pieces, but save for a few ill-fated experiments, paper money was hardly tried or used.
Faced with an immediate need to pay expenses relating to a military action against Canada during King William’s War, on December 10, 1690 the General Court authorized the issuing of £7,000 in public paper currency. This was the first public paper money issued in the history of Western civilization. Previously all currency had an intrinsic value of gold, silver or copper, much like the value of commodity items used for bartering. Now for the first time, the money itself had no intrinsic value other than the value of the paper on which it was printed. Rather, the value of the money came from the fact that it was backed by the colony.
It was legislated as being equivalent to the denomination printed on the bill and would be accepted as the equivalent of hard currency by the colony. Within a few months it was further legislated that the paper money would be accepted by the government for tax payments at a 5% premium and that on demand bills could be turned into the treasury for the equivalent in hard currency, if the colony had such hard currency available.
At first Massachusetts notes were accepted at par with specie, which was predominately the Spanish American silver 8 reales, called a Spanish “dollar” by the colonists. In Massachusetts the Spanish dollar was valued at 6 shillings. In 1690 for every 6s of paper money one could obtain a Spanish silver dollar. As more paper money was put into circulation individuals would no longer accept the paper as equal to specie. Thus began the usual problem of paper currency, or fiat money, inflation, and the usual response, revaluation, and all in response to the usual cause, the need to pay for a war.
By 1737 so much paper money was in circulation it took 22s6d (22 shillings, 6 pence) in paper money to equal a Spanish dollar. To rectify this problem the Commonwealth decided to revalue its paper money.
Starting with the issue of February 4, 1737 Massachusetts introduced a new series of notes, called New Tenor money, that was legislated to have three times the value of equivalent denomination notes from earlier emissions. However, as more notes were printed inflation continued and the value of both types of notes continued to drop. Once again, another adjustment to the currency was legislated.
For the issue of January 15, 1742 the notes were to have four times the value of equivalent denomination notes from Old Tenor emissions. At this time the emissions from 1737-1740 became known as Middle Tenor or Three Fold Tenor, while the 1742 and later emissions became known as New Tenor (or four fold Tenor). In effect Massachusetts had three different types of currency circulating at once; in 1742 a Spanish dollar was valued at 24s9d in Old Tenor bills, 8s3d in Middle Tenor bills or 6s2d in New Tenor notes. Unfortunately inflation continued so that by 1749 a Spanish dollar was valued at 45s in Old tenor bills, 15s in Middle tenor bills or 11s3d in New Tenor notes.
As individuals might make a purchase using all three varieties it was essential for merchants to know the current inflation rates and to keep a conversion chart handy (various charts were printed for this purpose)!
The real resolution finally came in 1751 with the mandatory redemption of all notes and a return to hard money. There would be no further emission of paper in Massachusetts until the “Soldier’s notes” emission of May 25, 1775 printed by Paul Revere to pay the soldiers who were soon to fight at the Battle of Bunker Hill on June 16th.
https://thisdayinusmilhist.wordpress.com/2014/02/03/february-3/
Economics
Military History
American History
Posted 10 y ago
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Thank you MSG (Join to see) for both the story of the first paper currency and the image. It is interesting how far we have come in the development of paper currency since that day in 1690.
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