Pennsylvania on Paper Money Basis When Bills of Credit Are Issued March 2, 1722–23

The first bills of credit, or paper-money, issued in the English American colonies were put forth by Massachusetts, in 1690, to pay the troops who went on an expedition against Quebec, under Sir William Phipps.

It was Governor Sir William Keith who first introduced the people of Pennsylvania to the pleasures and benefits of an irredeemable paper currency.

There had been great and long-standing complaint about the deficiency of a circulating medium, for the use of wampum had ceased, and foreign coin had never become plenty. The course of exchange ran heavily against the Province, and those who possessed money made enormous profits by the purchase and sale of bills.

The merchants of England did not ship bank-notes or coin to the Provinces. They paid for the produce which they purchased here with English goods, and settled the balances by shipments of sugar, rum, etc., from Barbadoes and other places in the West Indies, and by Negroes and indentured servants.

There seems to have been more hard money in Philadelphia than in New England, for Franklin, a paper-money man, notes in his autobiography how his fellow-workmen in Boston were surprised when he returned to his brother’s place in 1724 from Philadelphia. Franklin displayed a handful of silver, which was a rare sight, for they only had paper-money in Boston.

When Franklin first visited Philadelphia, in 1723, he noticed with surprise the free circulation of metallic money among the people of Pennsylvania. The whole of his own money then consisted of a Dutch dollar and a shilling’s worth of coppers.

But this condition soon changed for James Logan, in writing to the Proprietaries late in 1724, says, “No gold or silver passes amongst us.”

The Proprietary demanded sterling money in payment of quit-rents, no matter what the depreciation of the provincial currency. This was 161their right since they had nothing to do either with the emission of the currency or its depreciation.

As early as 1729 Logan wrote, “I dare not speak one word against it. The popular phrenzy will never stop till their credit will be as bad as they are in New England, where an ounce of silver is worth twenty shillings of this paper. They already talk of making more, and no man dares appear to stem the fury of popular rage.” Logan at that early date thought the king should arrest the delusion by proclamation.

The peltries, grain, flour, ships, cooper-stuff, and lumber of Philadelphia were always good for hard money with a good mercantile system. But the people were not satisfied.

It is quite likely that wages and small debts were paid almost entirely in the way of barter instead of money, and this, by the losses it occasioned produced discontent. The capitalists opposed a change in the currency, the farmers, laborers, and small trades people favored it.

In the language of petitions sent to the Assembly at this time, the friends of paper money contended that they were sensibly “aggrieved in their estates and dealings, to the great loss and growing ruin of themselves, and the evident decay of the province in general, for want of a medium to buy and sell with,” and they therefore prayed a paper currency.

The people of Chester County, on the other hand, asked to have the value of the current money of the Province raised, the exportation of money prohibited, and produce made a legal tender, so as to obviate the necessity for paper money. They did not want a regular State issue, but nevertheless, like men of more modern greenback times, they wanted an inconvertible paper money, a non-exportable currency, as if that were a blessing.

On March 2, 1722–23 an act was passed to issue £15,000. Governor Keith, in consenting to and promoting this experimental load, had been encouraged by the popularity of a similar measure matured by Governor Burnett of New Jersey.

Pennsylvania was the very last of the middle colonies to embark in the paper money manufacture; but once embarked, she plunged in rapidly and deeply.

This first small loan of £15,000 was to be redeemed within eight years. In 1723 £30,000 was issued; in 1740 the issue reached a total of £80,000.

Benjamin Franklin, who had urged and used his personal influence for this currency became alarmed and wrote, “I now think there are limits beyond which the quantity may be hurtful.” He was right.

In 1755 Pennsylvania had £160,000 currency out; and in 1783 the State’s irredeemable currency had been increased by various issues until it reached $4,325,000, a sum simply ruinous to all values.

162The general plan of these loans was good. No bills were loaned but on good security. The friends of the system were many.

Paper money was also issued at times by individuals. In May, 1746, Joseph Gray gave notice that Franklin had printed for him £27,100 in notes of hand of 2 d., 3 d., and 6 d., “out of sheer necessity for want of pence for running change. Whoever takes them shall have them exchanged on demand with the best money I have.”

In 1749 the scarcity of small change was so great that the inhabitants petitioned for relief, and a committee of the Assembly was appointed to bring in a bill for the issue of £20,000, mostly in small bills.

An association was formed for issuing paper money to relieve the pressure for change. Eight reputable merchants issued five-pound notes to the amount of £20,000, payable at nine months with five per cent interest. It was soon evident that anyone might do the same thing, and the community be flooded with valueless currency. It was also at the same time a new way of borrowing capital. A petition signed by two hundred tradesmen was presented to the Assembly, which forbade it.

In 1763 the whole paper-money system of the colonies, including that of Pennsylvania, was outlawed by act of Parliament, when Franklin wrote a pamphlet, protesting against the act.

This outlawing of colonial money had much to do with prejudicing the people of the colonies against the rule of Parliament.